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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999

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

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER: 000-23091

J.D. EDWARDS & COMPANY
(exact name of registrant as specified in its charter)

DELAWARE 84-0728700
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)

ONE TECHNOLOGY WAY, DENVER, CO 80237
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (303) 334-4000

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

As of September 8, 1999, there were 106,771,994 shares of the Registrant's
Common Stock outstanding.

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J.D. EDWARDS & COMPANY

TABLE OF CONTENTS

PAGE
NO.
---

PART I FINANCIAL INFORMATION

Item 1. Financial Statements................................................ 3
Consolidated Balance Sheets as of October 31, 1998
and July 31, 1999................................................... 3
Consolidated Statements of Operations for the Three and
Nine Months Ended July 31, 1998 and 1999............................ 4
Consolidated Statements of Cash Flows for the Nine Months
Ended July 31, 1998 and 1999........................................ 5
Notes to Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk........... 27

PART II OTHER INFORMATION

Item 1. Legal Proceedings................................................... 28
Item 2. Changes in Securities and Use of Proceeds........................... 28
Item 3. Defaults upon Senior Securities..................................... 28
Item 4. Submission of Matters to a Vote of Security Holders................. 28
Item 5. Other Information................................................... 28
Item 6. Exhibits and Reports on Form 8-K.................................... 28

SIGNATURES

J.D. Edwards is a registered trademark of J.D. Edwards & Company. The names of
all other products and services of J.D. Edwards used herein are trademarks or
registered trademarks of J.D. Edwards World Source Company. All other product
and service names used are trademarks or registered trademarks of their
respective owners.

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

J.D. EDWARDS & COMPANY

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

ASSETS

OCTOBER 31, JULY 31,
1998 1999
---------- ----------

CURRENT ASSETS:
Cash and cash equivalents $ 183,115 $ 78,451
Short-term investments 28,667 51,952
Accounts receivable, net of allowance for doubtful accounts of $12,900
at October 31, 1998 and $11,300 at July 31, 1999,
respectively 265,704 249,614
Prepaid and other current assets 32,823 44,042
---------- ----------
Total current assets 510,309 424,059
Long-term investments 322,527 261,478
Property and equipment, net 60,689 84,160
Software development costs, net 5,821 36,325
Other intangibles, net 1,847 47,511
Non-current portion of deferred income taxes 43,658 65,701
Deposits and other assets 5,622 6,080
---------- ----------
$ 950,473 $ 925,314
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 60,366 $ 39,572
Unearned revenue and customer deposits 121,092 128,192
Accrued liabilities 157,473 148,170
---------- ----------
Total current liabilities 338,931 315,934
Unearned revenue, net of current portion, and other 27,546 21,310
---------- ----------
Total liabilities 366,477 337,244
Commitments and contingencies (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 5,000,000 shares authorized; none
outstanding -- --
Common stock, $.001 par value; 300,000,000 shares authorized;
102,681,608 and 106,733,969 issued and outstanding as of
October 31, 1998 and July 31, 1999, respectively 103 107
Additional paid-in capital 406,886 451,777
Deferred compensation (677) (377)
Retained earnings 177,324 137,970
Accumulated other comprehensive income:
Foreign currency translation adjustments 360 (1,407)
---------- ----------
Total stockholders' equity 583,996 588,070
---------- ----------
$ 950,473 $ 925,314
========== ==========

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

J.D. EDWARDS & COMPANY

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

THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
-------------------------- --------------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------

REVENUE:
License fees $ 98,122 $ 74,949 $ 242,536 $ 211,752
Services 141,480 157,120 384,313 474,845
---------- ---------- ---------- ----------
Total revenue 239,602 232,069 626,849 686,597
COSTS AND EXPENSES:
Cost of license fees 11,199 7,505 30,503 20,217
Cost of services 91,283 101,778 246,430 307,845
Sales and marketing 68,334 89,198 180,195 241,958
General and administrative 20,639 21,233 57,289 71,109
Research and development 22,399 27,096 62,977 78,807
Amortization of acquired software
and other acquired intangibles -- 3,234 -- 3,584
Acquired in-process research and development -- 24,000 -- 26,141
---------- ---------- ---------- ----------
Total costs and expenses 213,854 274,044 577,394 749,661

OPERATING INCOME (LOSS) 25,748 (41,975) 49,455 (63,064)

Other income (expense):
Interest income 3,970 4,485 11,378 15,441
Interest expense (72) (150) (736) (770)
Foreign currency losses and other, net (991) (998) (1,666) 22
---------- ---------- ---------- ----------
Income (loss) before income taxes 28,655 (38,638) 58,431 (48,371)
Provision for (benefit from) income taxes 10,602 (5,416) 21,619 (9,017)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 18,053 $ (33,222) $ 36,812 $ (39,354)
========== ========== ========== ==========

NET INCOME (LOSS) PER COMMON SHARE:
Basic $ 0.18 $ (0.31) $ 0.38 $ (0.38)
========== ========== ========== ==========
Diluted $ 0.16 $ (0.31) $ 0.34 $ (0.38)
========== ========== ========== ==========
Shares used in computing per share amounts:
Basic 100,522 106,181 96,970 104,875
Diluted 110,867 106,181 109,503 104,875

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

J.D. EDWARDS & COMPANY

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

NINE MONTHS ENDED
JULY 31,
--------------------------
1998 1999
---------- ----------

OPERATING ACTIVITIES:
Net income (loss) $ 36,812 $ (39,354)
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Depreciation 17,329 18,104
Amortization of internal software development costs 4,735 3,669
Amortization of acquired software and other intangibles -- 3,584
Acquired in-process research and development -- 26,141
Benefit from deferred income taxes (580) (7,898)
Other 1,869 2,339
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net (51,187) 12,743
Prepaid and other assets (8,590) (15,167)
Accounts payable 2,809 (21,057)
Unearned revenue and customer deposits 60,307 (1,129)
Accrued liabilities 27,986 (9,748)
---------- ----------
Net cash provided (used) by operating activities 91,490 (27,773)

INVESTING ACTIVITIES:
Purchase of investments (204,981) (226,156)
Proceeds from maturities of investments 45,116 263,920
Purchase of property and equipment (26,551) (42,262)
Purchase of acquired companies, net of cash balances -- (98,904)
Proceeds from sale of assets and other, net 4,931 66
---------- ----------
Net cash used for investing activities (181,485) (103,336)

FINANCING ACTIVITIES:
Proceeds from issuance of common stock 43,219 29,971
---------- ----------
Net cash provided by financing activities 43,219 29,971

Effect of exchange rate changes on cash (918) (3,526)
---------- ----------

Net decrease in cash and cash equivalents (47,694) (104,664)

Cash and cash equivalents at beginning of period 224,437 183,115
---------- ----------
Cash and cash equivalents at end of period $ 176,743 $ 78,451
========== ==========

Supplemental disclosure of other cash and non-cash investing
and financing transactions:
Interest paid $ 736 $ 770
Income taxes paid 8,333 13,781
Retirement savings plan contribution funded with common stock 6,050 4,694
Common stock issued in acquisition -- 3,166

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

J.D. EDWARDS & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

INTERIM FINANCIAL STATEMENTS. The accompanying financial statements of J.D.
Edwards & Company (the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures are adequate to make the information presented not
misleading. The unaudited consolidated financial statements included herein have
been prepared on the same basis as the annual consolidated financial statements
and reflect all adjustments, which include only normal recurring adjustments
necessary for a fair presentation in accordance with generally accepted
accounting principles. The results for the nine-month period ended July 31, 1999
are not necessarily indicative of the results expected for the full fiscal year.
These consolidated financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1998.

USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

COSTS AND EXPENSES CLASSIFICATION. Charges related to acquisitions are
presented as separate line items in the Company's statements of operations.
These charges include amortization of acquired capitalized software, in-place
workforce, existing customer base and goodwill. Accordingly, the cost of license
fees as well as the other costs and expenses line items do not include
amortization of acquired software, the in-place workforce, existing customer
base or goodwill.

(2) EARNINGS PER COMMON SHARE

Basic earnings per share ("EPS") excludes the dilutive effect of common
stock equivalents and is computed by dividing net income (loss) by the weighted
average number of shares outstanding during the period. Diluted EPS includes the
dilutive effect of common stock equivalents and is computed using the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares consist of stock options, and the weighted
average shares outstanding for the fiscal 1998 periods have been adjusted to
include all common shares issuable under stock options using the treasury stock
method. Diluted loss per share amounts for the fiscal 1999 periods exclude the
outstanding stock options that are potentially dilutive as the effect of
including these common stock equivalents would be anti-dilutive, or would
decrease the reported loss per share. All shares owned by the J.D. Edwards &
Company Retirement Savings Plan were included in the weighted average common
shares outstanding for all periods.

The computation of basic and diluted EPS was as follows (in thousands,
except per share amounts):

THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
------------------------- -------------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------

Numerator:
Net income (loss) $ 18,053 $ (33,222) $ 36,812 $ (39,354)
========== ========== ========== ==========
Denominator:
Basic income (loss) per share -- weighted average shares
Outstanding 100,522 106,181 96,970 104,875
Dilutive effect of common stock equivalents 10,345 -- 12,533 --
---------- ---------- ---------- ----------
Diluted net income (loss) per share -- adjusted weighted
average shares outstanding, assuming conversion of common
stock equivalents, if dilutive to per share amounts 110,867 106,181 109,503 104,875
========== ========== ========== ==========

Basic net income (loss) per share $ 0.18 $ (0.31) $ 0.38 $ (0.38)
Diluted net income (loss) per share $ 0.16 $ (0.31) $ 0.34 $ (0.38)

(3) COMMITMENTS AND CONTINGENCIES

The Company leases three corporate headquarters office buildings and has
entered into an agreement to lease another building currently being constructed
on land owned by the Company once the construction is completed. The lessor, a
wholly-owned subsidiary of a bank, and a syndication of banks are collectively
financing up to $127.6 million in purchase and construction costs through a
combination of equity and debt. The Company guarantees the residual value of
each building up to approximately 85% of its original cost. The Company's lease
obligations are based on a return on the lessor's costs. Management has elected
to reduce the interest rate used to calculate lease expense by collateralizing
up to 97% of the financing arrangements with investments consistent with the
Company's investment policy. The Company may withdraw the funds used as
collateral at its sole discretion, provided it is not in default under the lease
agreement. At July 31, 1999, investments totaling $111.5 million were designated
as collateral for these leases. See also Note 7 - Litigation.

(4) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company uses hedging instruments to mitigate the foreign currency
exchange risk of certain assets and liabilities denominated in foreign currency.
The hedging instruments used are forward foreign exchange contracts with
maturities of generally three months or less in term. All contracts are entered
into with major financial institutions. Gains and losses on these contracts are
recognized as non-operating income or expense in the period in which the gain or
loss is recognized from the settlement or translation of the underlying assets
and liabilities. All gains and losses related to foreign exchange contracts are
included in cash flows from operating activities in the consolidated statements
of cash flows.

At July 31, 1999, the Company had approximately $38.8 million of gross U.S.
dollar equivalent forward foreign exchange contracts outstanding as hedges of
monetary assets and liabilities denominated in foreign currency. Net foreign
exchange transaction losses included in other income and expense totaled
$796,000 and $1,622,000 for the third quarter and nine-month period of fiscal
1998, respectively, and $1,074,000 and $1,468,000 for the third quarter and
nine-month period of fiscal 1999, respectively.

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and for Hedging Activities," was issued in June 1998
and will require companies to value derivative financial instruments, including
those used for hedging foreign currency exposures, at current market value with
the impact of any change in market value being charged against earnings in each
period. SFAS No. 133 will be effective for the Company in the first quarter of
fiscal 2001. The Company currently anticipates that the adoption of SFAS No. 133
will not have a material impact on its consolidated financial statements.

(5) COMPREHENSIVE INCOME

The Company implemented SFAS No. 130, "Reporting Comprehensive Income," in
the first quarter of fiscal 1999. This standard requires disclosure in the
financial statements of the total changes in equity resulting from revenue,
expenses, and gains and losses, including those which do not affect retained
earnings. The Company's comprehensive income (loss) was comprised of net income
(loss) and foreign currency translation adjustments. For the third quarter and
nine-month period ended July 31, 1998, the Company's comprehensive income was
$16.7 million and $34.1 million, respectively. For the third quarter and
nine-month period ended July 31, 1999, the Company's comprehensive loss was
$35.0 million and $41.1 million, respectively.

(6) ACQUISITIONS

The Company completed two acquisitions during the nine-month period ended
July 31, 1999. Both acquisitions were recorded as purchases and, accordingly,
the total purchase price of each company was allocated to the acquired assets
and liabilities at their fair values as of the closing dates of the mergers. For
purposes of allocating the purchase price to the identified acquired assets, the
term "fair value" is defined as fair market value, or the price at which an
asset would change hands between a willing buyer and a willing seller when the
former is not under any compulsion to buy and the latter is not under any
compulsion to sell, and both parties are able, as well as willing, to trade and
are well-informed about the asset and the market for that asset. The Company's
consolidated statements of operations do not include any revenue or expenses
related to the acquisitions prior to their closing dates.

NUMETRIX LIMITED. On June 16, 1999, the Company completed an acquisition of
privately-held Numetrix Limited ("Numetrix"), a Toronto-based provider of
Internet-enabled supply chain planning software. Numetrix's current product
suite will be integrated with the Company's existing enterprise application
solutions to link customers, suppliers and trading partners in collaborative
enterprise networks and will also continue to be sold separately. The purchase
price was paid in cash and consisted of $83.0 million for outstanding common and
preferred shares of Numetrix, $5.5 million for assumed debt and direct costs
totaling $6.3 million. The total purchase price of $94.8 million was allocated
to the acquired assets and liabilities at their fair values as of June 16, 1999.
Acquired intangible assets consisted of capitalized software valued at $32.8
million, the in-place workforce valued at $5.3 million and the existing customer
base valued at $19.9 million. The remaining excess purchase price of $17.8
million was recorded as goodwill. The intangible assets are being amortized on a
straight-line basis over three to four years. Additionally, $24.0 million of the
purchase price was allocated to in-process research and development ("IPR&D")
and charged to expense in the third quarter. Amortization expense for the
three-month period ended July 31, 1999 related to the software, in-place
workforce, customer base and goodwill were $1.4 million, $166,000, $622,000 and
$555,000, respectively.

THE PREMISYS CORPORATION. On February 26, 1999, the Company completed an
acquisition of The Premisys Corporation, a privately-held Illinois corporation
that provides visual configuration software and consulting services. Technology
acquired from The Premisys Corporation is being integrated with OneWorld(TM),
the Company's multi-platform applications. The purchase price was paid with a
combination of J.D. Edwards' common stock and cash. The acquisition was
accounted for as a purchase and the purchase price of $7.1 million was allocated
to the acquired assets and liabilities at their fair values as of February 26,
1999. Acquired intangible assets consist of $2.4 million of capitalized software
and $5.2 million of in-place workforce that are being amortized on a
straight-line basis over three to four years. Additionally, $2.1 million was
allocated to IPR&D and charged to expense in the second quarter. Total
amortization expense for the quarter and six-month period ended July 31, 1999
was $524,000 and $874,000, respectively. Future consideration that may be paid
in fiscal 2001 based upon certain future events is being recorded as
compensation expense through the second quarter of fiscal 2001.

(7) LITIGATION

On September 2, 1999, the Company learned that a shareholder class action
had been commenced in the United States District Court for the District of
Colorado on behalf of purchasers of the Company's common stock during the period
between January 22, 1998 and December 3, 1998. The complaint alleges that the
Company and certain of its officers and directors violated the Securities
Exchange Act of 1934 through a series of false and misleading statements. The
plaintiff seeks to recover damages on behalf of all purchasers of J.D. Edwards
common stock during the class period.

The Company believes the complaint is without merit and will vigorously
defend itself and certain of its officers and directors against such compliant.
The Company is currently unable to determine the ultimate outcome or resolution
of the complaint or whether resolution of this matter will have a material
adverse impact on the Company's financial position or results of operations or
estimate reasonably the amount of loss, if any, which may result from resolution
of this matter.

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

THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT
TO THE PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND
PROJECTIONS ABOUT J.D. EDWARDS' INDUSTRY, MANAGEMENT'S BELIEFS, AND CERTAIN
ASSUMPTIONS MADE BY J.D. EDWARDS' MANAGEMENT. WORDS SUCH AS "ANTICIPATES,"
"EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES," VARIATIONS OF
SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. THE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE
SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO
PREDICT; THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
FORECASTED IN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES
INCLUDE THOSE SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1998 UNDER "FACTORS AFFECTING THE COMPANY'S
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION" ON PAGES 11 THROUGH 20.
UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY
ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE. HOWEVER, READERS SHOULD CAREFULLY REVIEW THE RISK FACTORS
SET FORTH IN REPORTS OR DOCUMENTS THE COMPANY FILES FROM TIME TO TIME WITH THE
SECURITIES AND EXCHANGE COMMISSION, PARTICULARLY ON PAGES 22 THROUGH 26 OF THIS
REPORT, THE QUARTERLY REPORTS ON FORM 10-Q AND ANY CURRENT REPORT ON FORM 8-K.

RESULTS OF OPERATIONS

OVERVIEW. During the third quarter of fiscal 1999, the Company's results of
operations reflected an operating loss of $42.0 million compared to operating
income of $25.7 million for the third quarter last year. The net loss for the
third quarter of fiscal 1999 was $33.2 million, or $0.31 per share, compared to
net income of $18.1 million, or $0.16 per diluted share, for the same period
last year. For the first nine months of fiscal 1999 the Company's operating loss
was $63.1 million compared to operating income of $49.5 million for the same
period last year, and the net loss was $39.4 million, or $0.38 per share,
compared to net income of $36.8 million, or $0.34 per diluted share for the same
period last year. Included in the net losses were expenses for IPR&D and
amortization of acquired intangibles totaling $27.2 million and $29.7 million
for the quarter and nine-month period ended July 31, 1999, respectively. The
losses in the fiscal 1999 period were primarily a result of a decline in revenue
for the quarter and slowed revenue growth for the nine-month period along with
increased operating expenses compared to the same periods last year. Total costs
and expenses increased 28% in the third quarter of fiscal 1999 compared to the
same period last year, or an increase of 15% excluding charges related to the
Company's two acquisitions during fiscal 1999. Total costs and expenses
increased 30%, or 25% excluding the acquisition related charges, and total
revenue grew 10% for the nine-month period ending July 31, 1999 compared to the
same period last year.

In June 1999, the Company acquired all of the outstanding common and
preferred shares of privately-held Numetrix, a Toronto-based provider of
Internet-enabled supply chain planning software for a total purchase price of
$94.8 million in cash. In February 1999, the Company purchased The Premisys
Corporation with a combination of common stock and cash totaling $7.1 million.
These acquisitions were accounted for as purchases and, accordingly, operating
expenses were impacted in the second and third quarters subsequent to the
consummation dates of the acquisitions primarily as a result of IPR&D and
amortization of acquired intangibles. Operating expenses are expected to
increase in future quarters as a result of a full period impact from the
additional personnel, office, equipment costs and amortization charges from both
acquisitions.

Internal changes such as the Company's realignment of its sales force along
vertical industries and an investment in hiring and training sales account
executives, marketing consultants and vertical marketing support personnel
through the first quarter of fiscal 1999 also impacted the year-to-date fiscal
1999 results. The sales force hiring and training programs were completed by the
end of the first quarter of fiscal 1999 and the full impact of this growth was
reflected in the second and third quarter operating expenses. While operational
changes affected the Company's productivity and financial results in the current
fiscal year, these were investments for the long-term from which the Company
believes it will benefit in the future. Since the first part of the current
fiscal year, the Company has focused on controlling expenses by closely
reviewing headcount additions and adding personnel only in critical positions.
In addition, controls over discretionary expenses have been tightened throughout
the Company. Excluding the additional expenses of the Numetrix operations
subsequent to the acquisition and the IPR&D expense and amortization of acquired
intangibles, the Company's total quarterly costs and expenses decreased
sequentially by approximately $8.0 million in the third quarter compared to the
second quarter of this fiscal year.

External market and competitive factors also impacted the Company's results
for the third quarter and nine-month period of fiscal

1999. Specifically, a continued slowing of software purchases resulting from
companies focusing on Year 2000 preparations affected the Company's performance.
Management believes a maturation of the enterprise resource planning ("ERP")
market was a factor as many companies had purchased ERP systems prior to 1999 in
anticipation of the Year 2000. Additionally, management is focused on the
changing competitive environment, advances in technology and rapid expansion of
e-business.

The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of operations as a percentage of
total revenue (except for gross margin data):

THREE MONTHS NINE MONTHS
ENDED ENDED
JULY 31, JULY 31,
------------------ ------------------
1998 1999 1998 1999
------ ------ ------ ------

Revenue:
License fees 41.0% 32.3% 38.7% 30.8%
Services 59.0 67.7 61.3 69.2
------ ------ ------ ------
Total revenue 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of license fees (1) 4.7 3.2 4.9 3.0
Cost of services (1) 38.1 43.9 39.3 44.8
Sales and marketing 28.5 38.4 28.7 35.2
General and administrative 8.6 9.1 9.1 10.4
Research and development 9.4 11.7 10.1 11.5
Amortization of acquired software -- 1.4 -- 0.5
and other intangibles
Acquired in-process R&D -- 10.3 -- 3.8
------ ------ ------ ------
Total costs and expenses 89.3 118.0 92.1 109.2
Operating income (loss) 10.7 (18.0) 7.9 (9.2)
Other income (expense), net 1.2 1.4 1.4 2.2
------ ------ ------ ------
Income (loss) before income taxes 11.9 (16.6) 9.3 (7.0)
Provision for (benefit from) income taxes 4.4 (2.3) 3.4 (1.3)
------ ------ ------ ------
Net income (loss) 7.5% (14.3)% 5.9% (5.7)%
====== ====== ====== ======
Gross margin on license fee revenue (1) 88.6% 90.0% 87.4% 90.5%
Gross margin on services revenue (1) 35.5% 35.2% 35.9% 35.2%

- ----------

(1) Excludes amortization of acquired intangibles, including software, in-place
workforce, customer base and goodwill.

The Company is actively addressing its future operating plans and, given the
uncertainty and changes in the ERP market, has taken steps to remain competitive
in the future. ActivEra(TM) E-business, a comprehensive electronic business
solution released in May 1999 is expected to strengthen the Company's position
in the enterprise solution market. The Company acquired Numetrix and The
Premisys Corporation and made strategic changes in areas such as product
development, sales and marketing. Despite their short-term impact on earnings,
management believes these investments were necessary to remain competitively
positioned in the market for future growth and success. These investments were
aimed at helping the Company deliver solutions that allow customers to control
their entire business cycle and enabling the Company to compete for business
beyond the traditional ERP market. Additionally, the Company signed an agreement
with Siebel Systems, Inc. ("Siebel") which extends its customer relationship
management offering to include the mobile sales professional. The Company also
expanded its procurement solutions by providing an Intranet- and Internet-based
business-to-business electronic commerce solution for operating resources
through a recent agreement with Ariba, Inc. Through the end of the third
quarter, however, license revenues from products of The Premisys Corporation,
Numetrix, Siebel, and Ariba, Inc. were minimal. New product alliances with
companies such as IET Intelligent Electronics, XRT-Cerg, and Armstrong Laing
also extend the Company's solutions in e-business, customer relationship
management, knowledge management and supply chain management together with
partnerships with IBM and Synquest, Inc. now enable the Company to deliver a
fully-integrated end-to-end supply chain solution.

The Company has also reassessed its financial expectations and operating
plans for the remainder of fiscal 1999 and the first half of fiscal 2000. The
uncertainty in the ERP market has resulted in reduced visibility to future
software transactions and has made forward looking projections even more
challenging. There can be no assurance of the level of revenue growth, if any,
that will be

achieved or that the Company's financial condition, results of operations and
market price of the Company's common stock will not continue to be adversely
impacted by unfavorable factors.

Furthermore, due to the deterioration of economic conditions in the Asian
markets, particularly in Japan, and in certain other geographic regions, the
Company continues to closely monitor its investments in international areas to
ensure that such opportunities are deemed appropriate and are consistent with
the Company's overall future growth strategies. The Company made some personnel
changes and reduced some layers of management through a voluntary reduction in
force program in Japan and incurred a charge of $1.2 million to operating
expenses in the second quarter of fiscal 1999. During the nine-month period
ended July 31, 1999 a significant portion of the Company's operating losses were
a result of operations in Asia. Consistent with its historical results, the
Company expects that during fiscal 1999 it will continue to recognize a
relatively small percentage of its revenue from Asia and other specific
geographic areas that are currently being impacted by adverse economic
conditions. With the worldwide performance of the Company continuing to be
negatively impacted by certain economic conditions and the global market focus
on Year 2000 compliance, risks associated with these international investments
may not be mitigated by the broad geographic diversity of the Company's
operations. As a result, the Company's investments in certain international
areas could have a material negative impact on its future financial condition
and results of operations.

TOTAL REVENUE. Total revenue decreased by 3% to $232.1 million for the
quarter ended July 31, 1999 from $239.6 million for the quarter ended July 31,
1998. The revenue mix between license fees and services was 32.3% and 67.7%,
respectively, for the third quarter of fiscal 1999 compared to 41.0% and 59.0%,
respectively, for the same quarter last year. For the first nine months of
fiscal 1999, total revenue grew by 10% to $686.6 million from $626.8 million for
the same period in fiscal 1998. The revenue mix between license fees and
services was 30.8% and 69.2%, respectively, for the first nine months of fiscal
1999 compared to 38.7% and 61.3%, respectively, for the corresponding period
last year. The increase in total revenue for the third quarter and nine-month
period ended July 31, 1999 compared to the corresponding periods last year was
primarily from growth in services revenue, which typically follows the license
transactions closed during prior fiscal quarters. The decline in license fee
revenue and increase in services revenue during the first nine months of fiscal
1999 resulted in a significant change in revenue mix compared to last year.
There can be no assurance that the Company's revenue will not continue to be
adversely affected by increased market focus on Year 2000 compliance, economic
conditions, or other factors.

Geographically, the overall revenue mix was relatively unchanged for the
third quarter of fiscal 1999 compared to the same period last year. The
geographic areas defined as the United States, EMEA and the rest of the world
accounted for 61%, 23% and 16% of total revenue, respectively, for the third
quarter of 1999. Comparatively, for the third quarter of 1998, the United
States, EMEA and the rest of the world accounted for 60%, 24% and 16% of total
revenue, respectively. The geographic breakdown of total revenue for the
nine-month periods was 62%, 24% and 14% for the United States, EMEA and the rest
of the world, respectively, in fiscal 1999 and 63%, 22% and 15% for the United
States, EMEA and the rest of the world, respectively, in fiscal 1998.

LICENSE FEES. License fee revenue decreased 24% to $74.9 million for the
quarter ended July 31, 1999 from $98.1 million for the quarter ended July 31,
1998 due to fewer transactions and a decline in the average transaction size as
compared to the third quarter last year. License fee revenue decreased 13% to
$211.8 million for the nine-month period ended July 31, 1999 from $242.5 million
for the nine-month period ended July 31, 1998. Although the total volume of
license transactions increased during the nine-month period ended July 31, 1999
compared to the corresponding period last year, the average transaction size
declined compared to last year. The decrease in the average transaction size was
due in part to a larger portion of licenses for the Windows NT(R) platform,
which typically include fewer users than licenses for the UNIX(R) platform.
Additionally, the average transaction size declined for the AS/400(R) platform
for both the quarter and nine-month period due to a drop in the average number
of users licensed. The percentage of license revenue from new customers remained
the same during the third quarter compared to the same quarter last year, but
was higher during the nine-month period of fiscal 1999 compared to last year.

As previously discussed in the overview of the Company's results of
operations, the Company is experiencing increasing uncertainty in its business
due to external market and competitive factors, as well as a slower than
anticipated realization of benefits from internal operational changes.
Management invested in its capacity to achieve future license revenue growth by
expanding its direct sales force by 37% as of the end of the third quarter of
fiscal 1999 compared to a year ago. Additionally, in the first quarter of fiscal
year 1999, the Company realigned the sales force along vertical industries and
increased resources in vertical marketing support. While these new hires to the
sales force and vertical focus contributed to sequential growth in license fees
from the second to the third quarter of fiscal 1999, there can be no assurance
that the Company's license fee revenue, results of operations and financial
condition will not continue to be adversely affected in future periods as a
result of an increasing focus in the market on Year 2000

readiness, global economic conditions and intensified competitive pressures or
that the Company's operational investments for the long-term will be successful.

The Company expanded the number of its customers by 15% compared to the end
of the third quarter last year to approximately 5,400 at July 31, 1999, and
customers have increasingly accepted the OneWorld applications available for
Windows NT and UNIX platforms in addition to the AS/400 platform. As an
indication of OneWorld's growing acceptance on non-AS/400 platforms, 34% of
license activity was from customers using the Windows NT or UNIX platforms in
the third quarter of fiscal 1999 compared to 20% in the third quarter of the
previous year. For the nine-month period of fiscal 1999, 32% of license activity
was from customers using the Windows NT or UNIX platforms compared to 15% in the
nine-month period of the previous year. The remaining portion of license
activity was generated by customers using either World or OneWorld for the
AS/400. The Company expects that an increasing portion of the Company's future
license fee revenue will be generated from customers using Windows NT or UNIX
platforms compared to the previous year.

SERVICES. Services revenue grew 11% to $157.1 million for the quarter ended
July 31, 1999 from $141.5 million for the quarter ended July 31, 1998. Services
revenue grew 24% to $474.8 million for the nine-month period ended July 31, 1999
from $384.3 million for the nine-month period ended July 31, 1998. This increase
was due to higher revenue from consulting, the largest component of services,
and maintenance revenue. The increase in consulting revenue was primarily due to
prior period license fee revenue, which resulted in demand for implementation
services. Support revenue increased during both the quarter and nine-month
period compared to last year primarily as a result of the Company's growing
installed base of customers and the consistent maintenance renewal rates for
existing customers. Training revenue decreased during both the third quarter and
nine-month period of fiscal 1999 compared to the same periods last year
primarily due to the decrease in license fee revenue in the same periods.

As a percentage of total revenue, services revenue increased during the
third quarter and first nine months of fiscal 1999 compared to the same periods
in the prior year. This was primarily due to the timing of services revenue in
relation to license fee growth in prior periods. Given the minimal license fee
growth in the first quarter and a decline in license fee revenue in the second
and third quarter of fiscal 1999 in relation to the same periods a year ago,
future demand for services may decline in relation to prior year periods. In any
quarter, total services revenue is dependent upon license transactions closed
during the current and preceding quarters, the growth in the Company's installed
base of customers, the amount and size of consulting engagements, the number of
Company and business partner consultants available to staff engagements, the
number of customers referred to alliance partners for consulting and training
services, the number of customers who have contracted for support and the amount
of the related fees, billing rates for consulting services and training courses,
and the number of customers attending training courses. There can be no
assurance that the Company's services revenue will continue to grow or that the
results of operations and financial condition will not be adversely affected in
future periods.

Historically, the Company has been the primary service provider for its
customers, either directly or through subcontracted services from its business
partners. Subcontracted consulting and training services revenue from business
partners increased 11% for the quarter and 33% for the nine-month period ended
July 31, 1999 over the same periods in fiscal 1998. Direct services increased 2%
for the quarter and 12% for the nine-month period ended July 31, 1999 over the
corresponding periods in fiscal 1998. The services revenue generated through
subcontracted work accounted for 48% for the quarter and 49% for the nine-month
period ended July 31, 1999 of the Company's consulting and training services
revenue compared to 46% for the quarter and 44% for the nine-month period ended
July 31, 1998.

In addition to subcontracting out a substantial portion of its services work
to business partners, the Company is continuing to pursue a strategy of relying
on third-party alliance partners to contract directly with the Company's
customers under a referral arrangement for OneWorld implementations and related
services. The Company has recently established additional alliances, such as
with Andersen Consulting, Deloitte Touche Tohmatsu and Grant Thorton to achieve
this objective, and since last year several existing alliance partners began
providing significantly more resources to implement OneWorld. However, migration
to this services model is taking longer than originally anticipated. While the
number of transactions involving the alliance partners who contracted directly
with the Company's customers increased during the first nine months of fiscal
1999 compared to the same period last year, the number of implementations
referred to alliance partners to date under this arrangement remains relatively
limited. To the extent the Company is successful in establishing this strategy
and in generating license fee revenue, consulting revenue as a percentage of
total revenue is likely to gradually decrease as compared to the previous fiscal
year. However, there can be no assurance that the Company will be successful in
implementing its strategy.

REVENUE RECOGNITION. The Company licenses software under non-cancelable
license agreements and provides related services, including consulting, training
and support. In October 1997, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position ("SOP") 97-2, "Software
Revenue Recognition," which provides guidance on recognizing revenue on software
transactions and supersedes SOP 91-1. Further guidance was published during 1998
in SOP 98-4, "Software Revenue Recognition," and SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions."
Additionally, the AICPA issued technical questions and answers on financial
accounting and reporting issues related to SOP 97-2 in January 1999 and may
issue additional interpretations related to SOP 97-2 in the future.

The Company applied the provisions of SOP 97-2 on a prospective basis for
new software transactions entered into from the beginning of the first quarter
of fiscal 1999. The adoption of this guidance did not have a material impact on
the Company's financial condition or results of operations and did not have a
significant impact on its current licensing or revenue recognition practices.
However, there can be no assurance that additional guidance pertaining to the
new standards will not result in unexpected modifications to the Company's
current revenue recognition practices which could materially adversely impact
the Company's future license fee revenue, results of operations and financial
condition.

Consulting, implementation and training services are not essential to the
functionality of the Company's software products, are separately priced and are
available from a number of suppliers. Revenue from these services is recorded
separately from the license fee. The Company recognizes license fee revenue when
a non-cancelable, contingency-free license agreement has been signed, the
product has been delivered, fees from the arrangement are fixed or determinable,
and collection is probable. Revenue on all software license transactions in
which there are undelivered elements other than post-contract customer support
is deferred and recognized once such elements are delivered. Typically, the
Company's software licenses do not include significant post-delivery obligations
to be fulfilled by the Company and payments are due within a twelve-month period
from date of delivery. Where software license contracts call for payment terms
in excess of twelve months from date of delivery, revenue is recognized as
payments become due and all other conditions for revenue recognition have been
satisfied. Revenue from consulting, implementation and training services is
recognized as services are performed. Revenue from agreements for supporting and
providing periodic upgrades to the licensed software is recorded as unearned
revenue and is recognized ratably over the support service period. Such unearned
revenue includes a portion of the related arrangement fee equal to the fair
value of any bundled support services. The Company does not require collateral
for its receivables and reserves are maintained for potential losses.

COST OF LICENSE FEES. Cost of license fees includes business partner
commissions, royalties, amortization of internally-developed capitalized
software, documentation and software delivery expenses. The total dollar amount
incurred for the cost of license fees decreased 33% to $7.5 million for the
quarter ended July 31, 1999 from $11.2 million for the quarter ended July 31,
1998. For the nine-month period, the total dollar amount for the cost of license
fees decreased 34% to $20.2 million from $30.5 million for the same period last
year primarily due to lower decreased license revenue, royalty expenses and
business partner commissions. However, royalties are expected to increase in
future quarters as a result of agreements signed in May 1999 with Siebel and
Ariba, Inc. for the Company to resell their products. Amortization of
internally-developed capitalized software costs decreased 20% for the third
quarter and 23% for the nine-month period of fiscal 1999 compared to the same
periods of fiscal 1998 as certain software development costs were fully
amortized during fiscal 1998. The capitalized OneWorld costs will continue to be
amortized through the first quarter of fiscal 2000. Business partner costs may
represent a larger percentage of revenue compared to the previous year if the
Company is successful with certain expanded sales channel initiatives and
business alliances that would increase expenses and could reduce margins.
Software delivery expenses also may increase in future periods primarily due to
the opening of a software reproduction and distribution facility located in
Dublin, Ireland. Accordingly, the total cost of license fees is likely to
increase in future periods.

Gross margin on license fee revenue varies from quarter to quarter depending
upon the revenue volume in relation to certain fixed costs, such as the
amortization of internally-developed capitalized software development costs, and
the portion of the Company's software products that are subject to royalty
payments and the amounts negotiated for such royalties. The gross margin on
license fee revenue increased to 90.0% for the third quarter of 1999 from 88.6%
for the third quarter of last year primarily due to lower royalty and business
partner commissions. For the nine-month period ended July 31, 1999, the gross
margin on license fee revenue increased to 90.5% from 87.4% for the same period
last year, due also to the decrease in royalty expense and business partner
commissions. Due to the expected increase in royalties and software delivery
expenses, as well as possible increases in other costs, it is likely that the
gross margin on license fee revenue will decline over the remainder of fiscal
1999.

COST OF SERVICES. Cost of services includes the personnel and related
overhead costs for services, including consulting, training and support, as well
as fees paid to third parties for subcontracted services. Cost of services
increased 12% to $101.8 million for the

quarter ended July 31, 1999 from $91.3 million for the quarter ended July 31,
1998. For the nine-month period ended July 31, 1999, cost of services increased
25% to $307.8 million from $246.4 million for the same period last year. The
increase was primarily due to increased personnel expenses and subcontracted
business partner service costs to support the implementation and consulting
services as well as an increase in customer support staff. During the first nine
months of fiscal year 1999, a larger percentage of consulting and training
services revenue was generated through subcontracted work, which increased the
related costs compared to the same period last year. The gross margin on
services revenue remained relatively constant at 35.2% for both the third
quarter and first nine months of fiscal 1999 compared to 35.5% for the third
quarter and 35.9% for the first nine months of 1998.

Generally, the gross margin on support revenue is higher than on consulting
and training revenue, and any change in the mix in types of services will affect
the gross margin on total services revenue. In particular, the extent to which
the Company is successful in establishing its strategy of relying on alliance
partners to contract directly with the Company's customers for OneWorld
implementations and related services will affect gross margin on services
revenue. However, there can be no assurance that the Company will be successful
in implementing its strategy.

SALES AND MARKETING. Sales and marketing expense consists of personnel,
commissions and related overhead costs for the sales and marketing activities of
the Company, together with advertising and promotion costs. Sales and marketing
expense increased to $89.2 million for the quarter ended July 31, 1999 from
$68.3 million for the quarter ended July 31, 1998, representing 38.4% and 28.5%
of total revenue, respectively. Sales and marketing expense increased to $242.0
million for the nine-month period ended July 31, 1999 from $180.2 million for
the corresponding period last year, representing 35.2% and 28.7% of total
revenue, respectively. The increase in expense for both the quarter and
nine-month period was primarily the result of additional personnel and increased
advertising and promotion costs for the Company's expanded marketing activities.
The total number of sales and marketing personnel grew only minimally since the
end of the first quarter of fiscal 1999 but increased 52% as of July 31, 1999
compared to a year ago, partially as the result of employees added from The
Premisys Corporation and Numetrix acquisitions. The Company added personnel in
direct sales and supporting positions during the fourth quarter of fiscal 1998
and first quarter of fiscal 1999 in order to meet the Company's future sales
goals, to support the new vertical industry sales force alignment and to address
the Windows NT and UNIX market growth opportunities from the OneWorld version of
its application suites.

GENERAL AND ADMINISTRATIVE. General and administrative expense includes
personnel and related overhead costs for the support and administrative
functions of the Company. General and administrative expense increased to $21.2
million for the quarter ended July 31, 1999 from $20.6 million for the quarter
ended July 31, 1998, representing 9.1% and 8.6% of total revenue, respectively.
General and administrative expense increased to $71.1 million for the nine-month
period ended July 31, 1999 from $57.3 million for the nine-month period ended
July 31, 1998, representing 10.4% and 9.1% of total revenue, respectively. The
total dollar amount of expense increased primarily due to an increase in
personnel to facilitate expansion of the Company's operations from a year ago.
General and administrative expenses as a percentage of total revenue increased
primarily due to the lower than expected license fee revenue during the fiscal
1999 periods.

RESEARCH AND DEVELOPMENT. Research and development expense includes
personnel and related overhead costs for product development, enhancements,
upgrades, documentation and translations, quality assurance and testing.
Research and development expense increased to $27.1 million for the quarter
ended July 31, 1999 from $22.4 million for the quarter ended July 31, 1998,
representing 11.7% and 9.4% of total revenue, respectively. Research and
development expense increased to $78.8 million for the nine-month period ended
July 31, 1999 from $63.0 million for the nine-month period ended July 31, 1998,
representing 11.5% and 10.1% of total revenue, respectively. The increase was
primarily due to a 31% increase in the number of personnel compared to the end
of the third quarter last year. This increase in personnel includes
approximately 60 employees from the Company's acquisitions of The Premisys
Corporation and Numetrix.

Development resources were primarily devoted to enhancements of both the
Company's World and OneWorld application suites during the first nine months of
both fiscal 1998 and 1999. The Company ceased capitalizing OneWorld development
costs during fiscal 1997 and as a result, there were no software development
costs capitalized during fiscal 1998 and minimal amounts capitalized in the
first nine months of fiscal 1999. The Company anticipates that future research
and development expenses will increase in subsequent periods due in part to the
addition of The Premisys Corporation in the second quarter and the Numetrix
organization during the third quarter of fiscal 1999. Additionally, the Company
is continuing its ongoing product enhancements in e-business and other areas and
its integration of modules such as sales force automation and advanced planning
and scheduling, utilizing The Premisys Corporation and Numetrix development
teams and third-party development alliances such as Siebel and Ariba, Inc.

AMORTIZATION OF ACQUIRED SOFTWARE AND OTHER INTANGIBLES. Amortization
expense of acquired intangibles was related to the acquisitions of The Premisys
Corporation in February 1999 and Numetrix in June 1999. Acquired intangible
assets consist of capitalized software, in-place workforce, existing customer
base and goodwill. The Numetrix acquisition resulted in acquired intangible
assets including $32.8 million for capitalized software, $5.3 million for the
in-place workforce, $19.9 million for the existing customer base, and $17.8
million for goodwill. Acquired intangible assets associated with the acquisition
of The Premisys Corporation include $2.4 million for capitalized software and
$5.2 million for the remaining excess purchase price attributed to the in-place
workforce. The intangible assets will be amortized over their estimated useful
lives of three to four years. The total expense for amortization of acquired
intangibles was $3.2 million in the third quarter of fiscal 1999 and $3.6
million for the nine-month period ended July 31, 1999. In future quarters, total
amortization charges will increase as a full quarter's impact of both
acquisitions is recognized

IN-PROCESS RESEARCH AND DEVELOPMENT. IPR&D expenses were non-recurring
charges in connection with the acquisitions of Numetrix in June 1999 and The
Premisys Corporation in February 1999. IPR&D consists of those products which
are not yet proven to be technically feasible, but have been developed to a
point where there is value associated with them in relation to potential future
revenue. In considering IPR&D, only those projects identified as material and
that represented breakthroughs in relation to existing technology were valued
and recorded as expense. Because technological feasibility is not yet proven and
no alternative future uses are believed to exist for the in-process
technologies, the assigned values were expensed immediately upon the closing
dates of the acquisitions. IPR&D expenses were $24.0 million in the third
quarter of fiscal 1999 and $26.1 million for the nine-month period ended July
31, 1999.

Numetrix is a leading provider of Internet-enabled supply chain planning
software, including demand planning, production scheduling and distribution
chain applications, for medium and large manufacturing companies. The Numetrix
product suite will be integrated with the Company's existing enterprise
application solutions to link customers, suppliers and trading partners in
collaborative enterprise networks. Their software modules will also continue to
be sold separately. The Numetrix acquisition was accounted for as a purchase,
and the Company retained an independent appraiser to assist with assigning fair
values to the intangible assets. Specifically identified intangible assets
include developed technology, in-process technology, in-place workforce and the
existing customer base. The valuations relied on methodologies that most closely
related the fair market value assignment with the economic benefits provided by
each asset and the risks associated with the assets. In valuing both the
developed and in-process technology, an income-based approach was determined to
best quantify the economic benefits using projections of net cash flows and the
risks by applying an appropriate discount rate.

Numetrix was developing major revisions and enhancements of almost all of
the modules of its product suite as of the date of acquisition. A substantial
amount of research and development had been completed on a new discrete
scheduling product that represents a strategic product designed to address the
market for discrete factory planning for middle-market companies. Also underway
were the development of a new demand planning module and a new collaborative
enabler. Following is a description of the specific nature of each of the new
in-process development projects acquired:

o The most significant in-process technology is being designed to offer an
operational-level, discrete planning and scheduling solution targeted at
the middle market. Numetrix's current solution in the market relies on
process scheduling rather than discrete scheduling, and a large technical
difference exists between the two types of scheduling. Process scheduling
is used by manufacturers in industries, such as paper products and
processed foods, with significant capital investment in the machinery
compared with the raw material products. These types of industries require
production and scheduling systems to coordinate with the interruptible
nature of the manufacturing process. In comparison, discrete scheduling is
utilized in industries with non-interruptible processes with emphasis on
the product materials rather than the machinery, such as computer component
manufacturing. The two types of scheduling employ different data models and
users in each case require different operating parameters from production
scheduling solutions. As of the valuation date the beta release was
scheduled for September 1999, and the development was estimated to be
nearly 90% complete. This project continues to progress; however, an alpha
release is now scheduled in September and the beta release was postponed
until December 1999.

o A new demand-planning module was being designed to enhance enterprise-wide
collaborative forecasting and to address forecast reconciliation. This
application is intended to be marketed as a component of both the Numetrix
product suite and the new discrete product. New features of this product
include a full forecasting graphical interface which allows for
manipulation of variables and inputs to optimize demand planning. As of the
valuation date Numetrix was analyzing

requirements for the product and had not begun to write code. The first
scheduled release was planned for the middle of calendar 2000. As of the
acquisition date this module was less than 10% complete. Currently, the
project was postponed pending further evaluation by management.

o Another in-process technology, a collaborative enabler, is designed to
efficiently interface the messaging architecture among applications that
allow real-time, alert-driven collaboration. The product automatically
detects changes to data in other applications and instantaneously processes
the impact of the changes among applications. It is designed to integrate
into the Numetrix product suite solution and offers a more cost-effective
solution for messaging optimization as compared to the current technology.
The initial product release was scheduled for the middle of calendar 2000,
and as of the acquisition date the technology was estimated to be 13%
complete. The Company has not changed the product schedule since the
acquisition date.

Both the developed technology and in-process development valuations were
based primarily on an income approach that examined all projected revenues and
expenses attributable to the assets over the economic life of each. A variation
of the income approach that applies a percentage of completion calculation was
also used to value in-process technology and this method was used for recording
the fair value of in-process development. In this approach, the research and
development costs to complete the in-process technology are not deducted as an
expense. However, the net cash flows are multiplied by the percentage of
completion of the technology. The percentage of completion was based on the
development expense spent as of the valuation date as a percentage of the total
required development expense for each new product and each new release of the
existing products.

The basis of the financial projections used in the valuation analysis were
management projections of the revenue and expenses likely to be realized by
Numetrix. Projected revenues were split between developed technology, in-process
technology and future technology to be developed subsequent to the valuation
date. The classification of each research and development project as complete or
under development was made in accordance with the guidelines of SFAS No. 86,
SFAS No. 2 and Financial Accounting Standards Board Interpretation No. 4. All
expenses associated with those revenues were deducted, including cost of goods
sold, sales and marketing, general and administrative expenses and research and
development expenses. Allocations of revenue and expenses between developed,
in-process and future technology were based on the development schedule of new
products and new versions of existing products and the estimated lines of code
needed to complete each in-process product phase as provided by Numetrix. Unless
otherwise appropriate, these expenses were allocated to developed, in-process
and future technology in the same ratio as the revenue. An economic rent for use
of other assets was deducted, including the in-place workforce, working capital,
fixed assets, trademark and customer base. A royalty rate for the proprietary
Distributed Object Messaging Architecture (DOMA) was deducted where appropriate
for applications relying on this existing technology. Income taxes were deducted
at the estimated effective tax rate for the company. An appropriate discount
rate was applied to the projects to calculate the net present value of the
developed and in-process technology over their economic lives.

The valuations used a discounted cash flow analysis of financial
projections over the estimated useful lives of the existing technology. After
the end of the projection period, no further revenues were assumed and no
residual value of the technologies was used. The projected revenue stream by
product - developed, in-process and future - was determined by the existing
lines of software code and incremental lines of code for future releases of each
product. The discount rate was based on the weighted average cost of capital
method, and was determined to be 22.5% for Numetrix. This same rate was used for
valuing the IPR&D due to the level of risk, which was considered the same as
that for the company as a whole. A discount rate of 17.5% was used for Numetrix
developed technology due to the lower level of risk.

Financial projections used to value the intangibles included breakdowns of
revenue from license fees, implementation and consulting services and
maintenance, along with costs of the revenue components, major operating expense
categories, and income taxes for the current fiscal year through Numetrix's
fiscal year ending February 28, 2009. Based upon historical data provided by
management of Numetrix regarding the rate at which the code base for developed
technology would become obsolete, the expected replacement and augmentation of
existing software code for each product, as well as the rate at which
replacement technology would be developed, a relatively lengthy projection
period was deemed appropriate. Significant changes were not anticipated from
historical pricing or gross margins. Management anticipates solid revenue growth
consistent with historical and projected results of competitors as well as
general market expectations for the supply chain management space and especially
web-enabled applications such as those currently and expected to be offered by
Numetrix. Also, the discrete scheduling product currently under development
targets the much larger market of mid-sized manufacturing companies in addition
to the company's traditional market of Fortune 500 customers. Operating expenses
are also expected to increase significantly but, as a percentage of revenue, are
projected to fall closer in line with industry averages consistent

with more stable or profitable software companies such as the major ERP
providers, including J.D. Edwards, Oracle or SAP. Accordingly, the operating
margin is expected to be at a break-even in the current fiscal year and
gradually increase through the fiscal year ending February 28, 2009. The
appraisal resulted in a value of $24.0 million for IPR&D and $32.8 million for
developed technology.

The Premisys Corporation, a privately-held Illinois corporation, is in the
business of providing visual configuration software and consulting services. At
the date of acquisition, The Premisys Corporation was developing major
enhancements to its CustomWorks product, such as functionality to address setup
complexities and quoting. Additionally, The Premisys Corporation and J.D.
Edwards had begun developing an interface between CustomWorks and OneWorld under
a Product Alliances Partner Agreement entered into by the two companies in
August 1997. Technology acquired in the Company's purchase of The Premisys
Corporation is currently being fully integrated with OneWorld, furthering
enhancements to the Company's SCOREx (Supply Chain Optimization and Real-Time
Extended Execution) solution.

The percentage completion variation of the income approach was also used to
value the IPR&D from The Premisys Corporation acquisition based on projected
revenues and expenses likely to be realized. However, both a replacement cost
approach and market approach were also considered and provided further support
for the valuation. The percentage of completion for the in-process technology
was based on the development expense spent as of the valuation date as a
percentage of the total required development expense. The financial projections
include revenues from license fees, implementation and consulting services and
maintenance, along with costs of the revenue components, major operating expense
categories, and income taxes for the current fiscal year through fiscal year
2003. Charges for other assets were also deducted, including a royalty for the
core technology, fixed assets, working capital and other intangibles. Income
taxes were deducted at the estimated effective tax rate for the company. A
discount rate of 21% was deemed appropriate for the level of risk associated
with the development projects. This rate was used over the economic life to
calculate the net present value of $2.4 million for the developed and $2.1
million for the in-process technology.

Management anticipates solid revenue growth consistent with the historical
and projected results of competitors as well as general market expectations for
the supply chain management space and front office applications such as
CustomWorks. Operating expenses are also expected to increase significantly, but
are projected to gradually fall in line with industry averages consistent with
more established companies such as the major ERP providers, including J.D.
Edwards, Oracle or SAP. Accordingly, the operating margin is expected to grow
over the next two years but then gradually decline as the developed and
in-process products mature.

The inability of the Company to complete the in-process development
projects within the expected schedule could materially impact future revenue and
earnings as management believes supply chain solutions such as those offered by
The Premisys Corporation and Numetrix are integral to its ability to remain
competitive in the extended ERP market.

OTHER INCOME (EXPENSE). Other income (expense) includes interest income
earned on cash, cash equivalents and investments, interest expense, foreign
currency gains and losses, and other non-operating income and expenses. Interest
income increased to $4.5 million for the quarter and $15.4 million for the
nine-month period ended July 31, 1999 from $4.0 million for the quarter and
$11.4 million for the nine-month period ended July 31, 1998. Interest income is
expected to decline in future periods as a result of lower cash and investment
balances due to the cash layout for the Numetrix acquisition. Other income also
increased due to proceeds from a legal judgement received during the second
quarter of fiscal 1999. Offset by hedging activities during the current year,
foreign currency losses were $1,074,000 and $1,468,000, respectively, during the
quarter and nine-month period ended July 31, 1999 compared to a net loss of
$796,000 and $1,622,000, respectively, for the quarter and nine-month period
ended July 31, 1998. The losses were primarily due to the strengthening of the
U.S. dollar against many other currencies during the nine months of both fiscal
years.

During late fiscal 1998, the Company broadened its foreign exchange hedging
activities to help offset the effects of exchange rate changes on cash exposures
from receivables and payables denominated in foreign currencies. Such hedging
activities cannot completely protect the Company from the risk of foreign
currency losses due to the number of currencies in which the Company conducts
business, the volatility of currency rates, and the constantly changing currency
exposures. Foreign currency gains and losses will continue to result from
fluctuations in the value of the currencies in which the Company conducts its
operations as compared to the U.S. dollar, and future operating results will be
affected to some extent by gains and losses from foreign currency exposure.

The Company uses hedging instruments to mitigate foreign currency exchange
risk of assets and liabilities denominated in foreign currency. The hedging
instruments used are forward foreign exchange contracts with maturities of
generally three months or less in

term. All contracts are entered into with major financial institutions. Gains
and losses on these contracts are recognized as non-operating income or expense
in the period in which the gain or loss is recognized from the settlement or
translation of the underlying assets and liabilities. All gains and losses
related to foreign exchange contracts are included in cash flows from operating
activities in the consolidated statements of cash flows.

OTHER DATA REGARDING RESULTS OF OPERATIONS. The impact of the charges for
acquired IPR&D costs and amortization of intangibles on the net loss and net
loss per share in the fiscal 1999 periods is presented below. This supplemental
information does not reflect the Company's results of operations in accordance
with generally accepted accounting principles ("GAAP") and it is not intended to
be superior to or more meaningful than other information presented herein that
was prepared in accordance with GAAP.

THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, 1999 JULY 31, 1999
----------------------------- ----------------------------
Before IPR&D After Before IPR&D After
and IPR&D and and IPR&D and
amortization amortization amortization amortization
of acquired of acquired of acquired of acquired
intangibles intangibles intangibles intangibles
----------- ----------- ----------- -----------

Loss from operations $ (14,741) $ (41,975) $ (33,339) $ (63,064)
Other income (expense), net 3,337 3,337 14,693 14,693
Provision for (benefit from)
income taxes (4,219) (5,416) (6,899) (9,017)
---------- ---------- ---------- ----------
Net loss $ (7,185) $ (33,222) $ (11,747) $ (39,354)
========== ========== ========== ==========

Net loss per share (1) $ (0.07) $ (0.31) $ (0.11) $ (0.38)
========== ========== ========== ==========
Shares used in computing net loss
per share (1) 106,181 106,181 104,875 104,875

(1) Common stock equivalents such as stock options are not included in the
computation of the net loss per common share for the fiscal 1999 periods
because the effect of including common stock equivalents would be to
decrease the reported loss per common share.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 1999, the Company's principal sources of liquidity consisted
of $78.5 million of cash and cash equivalents, $313.4 million of short-term and
long-term investments and an unsecured, revolving line of credit. No amounts
were outstanding under the line of credit during the nine-month periods ended
July 31, 1999 or 1998. The Company had working capital of $108.1 million at July
31, 1999 and a current ratio of 1.3 to one. Included in determining such amounts
are short-term unearned revenue and customer deposits of $128.2 million. The
majority of short-term unearned revenue represents annual support payments
billed to customers, which is recognized ratably as revenue over the support
service period. Without the short-term unearned revenue and customer deposits,
working capital and the current ratio would have been $236.3 million and 2.3 to
one, respectively.

The Company's accounts receivable days sales outstanding ("DSO") was 97 at
July 31, 1999 compared to 84 at July 31, 1998. DSO was calculated on a "gross"
basis by dividing the quarter-end accounts receivable balance by revenue for the
quarter and multiplied by 90. The Company's DSO can fluctuate depending upon a
number of factors, including initial payment terms and the length of time
receivables are outstanding, the concentration of transactions that occur toward
the end of each quarter and the variability of quarterly operating results. See
"Factors Affecting The Company's Business, Operating Results and Financial
Condition -- Quarterly Financial Results are Subject to Significant
Fluctuation."

The Company used $27.8 million in cash for operating activities during the
nine-month period ended July 31, 1999 compared to generating $91.5 million in
cash during the nine-month period ended July 31, 1998. The decrease in operating
cash flow was due to the net loss for the fiscal 1999 period before acquired
IPR&D and cash payments for liabilities, prepaid and other assets, somewhat
offset by collections of accounts receivable.

The Company used $103.3 million in cash for investing activities for the
nine-month period ended July 31, 1999 compared to $181.5 million for the
nine-month period ended July 31, 1998. Net cash payments totaled $94.8 million
for the Numetrix acquisition during the third quarter of fiscal 1999. The
Company purchased The Premisys Corporation for a net cash payment of $4.3
million and shares of J.D. Edwards' common stock valued at $3.2 million during
the second quarter of fiscal 1999. During fiscal 1998, the primary investing
activity was the purchase of short- and long-term debt and equity securities.
The decrease from the prior year was primarily due to the investment of the
remaining IPO proceeds during the first quarter of 1998. During the first nine
months of both fiscal years, the Company purchased furniture, fixtures and
equipment necessary to support its increased headcount and expanding operations.

Financing activities provided $30.0 million in cash during the first nine
months of fiscal 1999 compared to $43.2 million for the same period last year
from exercises of common stock options and the Employee Stock Purchase Plan. The
Company issued a total of 3.8 million shares of common stock through employee
stock plans during the first nine months of fiscal 1999. The Company did not
have other significant net financing activities for the first nine months of
fiscal 1999 or during the same period last year.

The Company leases three corporate headquarters office buildings and has
entered into agreements to lease one additional building currently being
constructed on land owned by the Company once construction is completed. The
lessor, a wholly-owned subsidiary of a bank, and a syndication of banks are
collectively financing up to $127.6 million in purchase and construction costs
through a combination of equity and debt. The Company guarantees the residual
value of each building up to approximately 85% of its original cost. The
Company's lease obligations are based on a return on the lessor's costs.
Management has elected to reduce the interest rate used to calculate lease
expense by collateralizing up to 97% of the financing arrangements with
investments consistent with the Company's investment policy. The Company may
withdraw the funds used as collateral at its sole discretion, provided it is not
in default under the lease agreement. At July 31, 1999, investments totaling
$111.5 million were designated as collateral for these leases.

In August 1999, the Company authorized the repurchase of up to eight million
shares of the Company's common stock under a share repurchase plan. The plan is
designed to partially offset the effects of share issuances under the stock
option and employee stock purchase plans. The number of shares to be purchased
and the timing of purchases will be based on several factors, including the
level of stock issuances under the stock plans, the price of J.D. Edwards'
stock, general market conditions and other factors. Stock repurchases may be
effected from time to time at management's discretion through forward, put and
call transactions, or open market purchases.

Management believes its cash and cash equivalents balance, short-term and
long-term investments, funds generated from operations and amounts available
under existing credit facilities will be sufficient to meet its cash needs for
at least the next twelve months. The Company may continue to use a portion of
its short-term and long-term investments to acquire businesses, products or
technologies that are complementary to those of the Company and its plans to
acquire treasury stock. There can be no assurance, however, that the Company
will not require additional funds to support its working capital requirements or
for other purposes, in which case the Company may seek to raise such additional
funds through public or private equity financing or from other sources. There
can be no assurance that such additional financing will be available or that, if
available, such financing will be obtained on terms favorable to the Company and
would not result in additional dilution to the Company's stockholders.

IMPACT OF THE YEAR 2000 ISSUE

The Year 2000 issue is a result of computer systems and other electronic
equipment using software processors or embedded chips which use only two digit
entries in the date code field and may not be able to distinguish whether "00"
means 1900 or 2000. The potential for system errors and failures involves
substantially all aspects of the Company's internal operations, including
computer systems, voice and data networks and the infrastructure of its
facilities.

To address the company-wide internal Year 2000 readiness activities, the
Company established a corporate readiness program during fiscal 1998 to
coordinate efforts already then underway in the information technology ("IT")
and software development departments and to expand the program to include all
business functions and geographic areas. The program is addressing internal
operational and financial risks as well as those associated with business
partners and other third parties. Status reports on this program are
periodically presented to the Company's senior management and to the audit
committee of the board of directors.

STATE OF READINESS. The Company's business operations are significantly
dependent upon the proprietary software products it

licenses to customers. Management believes it has already successfully addressed
the Year 2000 issues in the current versions of its proprietary software
products and does not anticipate any business interruptions associated with
these applications. The Company has been encouraging its customers to migrate to
current product versions that are Year 2000 ready.

Certain custom software applications used internally are not yet Year 2000
ready, and the Company plans to finish the programming of needed revisions,
testing and implementation by October 1999. An internal upgrade to product
versions of third-party software that are Year 2000 ready is also expected to be
completed by October 1999. Additionally, the Company is working with all service
providers to protect its operations from the potential effects of a third party
failing to become Year 2000 ready.

The following six-step process is being followed to assess the Company's
internal state of readiness and to direct preparations for the Year 2000:

1) Awareness -- Make all levels of the organization aware of Year 2000
issues.

2) Inventory -- Obtain detailed lists of specific issues from
representatives in every area of the Company's operations.

3) Assessment -- Complete a detailed inventory review to determine and
prioritize areas of exposure; identify mission critical processes and
systems; initiate certification of Year 2000 compliance for
vendors/suppliers/landlords; establish contingency plans.

4) Resolution-- Decide which systems to replace, retrofit or retire;
initiate conversion to systems that are Year 2000 ready.

5) Testing -- Obtain assurance that conversions were completed properly
and that the systems and processes will function correctly; finalize
contingency plans.

6) Deployment -- Implement new or modified systems and processes back
into normal production; implement contingency plans where appropriate.

Overall, the Company has nearly completed addressing the issues identified
in its readiness program, excluding any issues related to the current versions
of its proprietary software products which management believes to be generally
Year 2000 compliant. The Company has completed 100% of the awareness, inventory,
assessment, and resolution phases, 95% of the testing phase and 92% of the
deployment phase in its readiness of IT systems. In relation to its state of
readiness for non-IT areas and issues related to third parties with which the
Company has a material relationship, the Company has completed substantially all
of the first five phases and 91% of the deployment phase. Management expects to
be substantially Year 2000 ready company-wide no later than December 1999.

COSTS. The Company estimates the direct costs to remediate Year 2000 issues
will total less than $2.0 million and does not anticipate such costs will have a
material impact on its results of operations. As the Company has neared
completion of its readiness program, the estimate of total costs decreased.
Initial estimates included amounts for equipment and systems that have now been
assessed and/or tested to be Year 2000 ready and that did not need to be
replaced. The estimated costs include the budget for the Company's corporate
readiness programs, IT and non-IT costs, including legal expenses, and expenses
associated with a field readiness task force and equipment purchases. Such costs
do not include an estimate for labor, overhead or other resources that are
associated with the impact of Year 2000 compliance but not directly involved in
the project and also not expected to have a material impact on results of
operations. To date, the direct costs incurred to remediate Year 2000 issues are
approximately $1.3 million.

RISKS. Failure to correct mission critical Year 2000 problems could cause a
serious interruption in business operations and could have a material impact on
the Company's results of operations, liquidity and financial condition. The
actions currently being taken are expected to significantly reduce the risks of
an adverse impact. However, due to the scope of the Company's operations and the
extent of Year 2000 risks, it is likely that the Company will not be able to
eliminate all potential problems before they arise.

Significant uncertainty exists in the ERP software industry concerning the
potential effects associated with Year 2000 readiness. Management believes that
customers and potential customers purchasing patterns are being affected in a
number of ways, and the current slowing in license fee growth may be primarily
due to such changes. Many companies have already expended significant resources
to upgrade their systems. These expenditures may result in reduced funds
available to purchase software products such as those the Company offers.
Additionally, it is possible that certain of the Company's customers are
purchasing support contracts only to ensure that they are Year 2000 ready and
then will cancel such contracts. Many potential customers may defer purchasing
Year

2000 ready products as long as possible, accelerate purchasing such products,
switch to other systems or suppliers, or purchase the Company's products only as
an interim solution. Although the Company currently offers software products
that are designed and have been tested to be ready for the Year 2000, there can
be no assurance that the Company's software products contain all necessary date
code changes. Furthermore, it has been widely reported that a significant amount
of litigation surrounding business interruptions will arise out of Year 2000
issues. It is uncertain whether, or to what extent, the Company may be affected
by such litigation.

The Company mailed information regarding the Year 2000 issue along with a
questionnaire to its customers in March 1998 to assist them in preparations for
the century change as well as to help the Company assess its customer service
demands. Based upon the number of responses received and the number of customers
that originally licensed recent product versions, the Company estimated that a
significant majority of its customer base is currently operating with a version
of its software applications that is Year 2000 ready. However, the Company could
be faced with an inability to meet the demand for services to upgrade its
existing installed base of customers or to meet increased demand from potential
customers who still need to address their Year 2000 issues.

Factors outside the Company's control could cause significant disruptions of
business activities and affect the Company's ability to be ready for the Year
2000 such as the failure of its third-party business partners, suppliers,
government entities, customers, and others to adequately prepare. Additionally,
third-party software and computer technology used internally may materially
impact the Company if not Year 2000 compliant. The Company's operations may be
at risk and a material adverse impact to the Company's results of operations,
liquidity and financial condition could result if any third parties fail to
adequately address the problem or if software conversions result in system
incompatibilities with these third parties.

CONTINGENCY PLANS. As part of the six-step process previously outlined,
specific contingency plans were developed in connection with the assessment and
resolution to the mission critical risks identified. Such planning is
complicated by the risk of multiple Year 2000 problems and the fact that many of
the Company's risks reside with third parties who may not successfully address
their own risks. However, the Company has currently established certain
contingency plans for both IT and non-IT systems, and it is continuing to
develop such plans regarding the identified mission critical functions. Such
plans include backup power for the Company's facilities, explicit manual
"workaround" procedures and the identification of key contacts worldwide who
will be responsible for addressing specific issues and implementing such plans.

EURO

In January 1999, a new currency called the ECU or the "euro" was introduced
in certain Economic and Monetary Union ("EMU") countries. During 2002, all
participating EMU countries are expected to be operating with the euro as their
single currency. During the next three years, business in participating EMU
member states will be conducted in both the existing national currency and the
euro. As a result, companies operating in or conducting business in these EMU
member states will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling these
currencies, including the euro. Although the Company currently offers software
products that are designed to be euro currency enabled and management believes
it will be able to accommodate any required euro currency changes, there can be
no assurance that the software will contain all the necessary changes or meet
all of the euro currency requirements. If the Company's software does not meet
all the euro currency requirements of its business, its operating results and
financial condition would be materially adversely affected. The Company has not
had and does not expect a material impact on its results of operations from
foreign currency gains or losses as a result of its transition to the euro as
the functional currency for its subsidiaries based in EMU countries.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company will be required to apply recently issued accounting standards
in its future consolidated financial statements. SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," establishes standards
for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports. SFAS No. 132, "Employers' Disclosures about Pensions and
Other Post-Retirement Benefits," revises employers' disclosures about pension
and other post-retirement benefit plans, but does not change the measurement or
recognition of those plans. SFAS No. 133, "Accounting for Derivative Instruments
and for Hedging Activities," will require companies to value derivative
financial instruments, including those used for hedging foreign currency
exposures, at current market value with the impact of any change in market value
being charged against earnings in each period. SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions,"
provides additional guidance regarding software revenue recognition. The Company
has determined that the adoption of these recently issued standards will not
have a material impact on its financial condition or results of operations. SFAS
Nos. 131 and 132 are effective for disclosures to be included in the Company's
financial statements for the fiscal year ending October 31, 1999. SOP 98-9 will
be effective for the Company's first quarter of fiscal 2000. SFAS No. 133 will
be effective for the Company's first quarter of fiscal 2001.

FACTORS AFFECTING THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION

IN ADDITION TO OTHER INFORMATION CONTAINED IN THIS QUARTERLY REPORT ON FORM
10-Q, THE FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING
THE COMPANY AND ITS BUSINESS BECAUSE SUCH FACTORS CURRENTLY HAVE A SIGNIFICANT
IMPACT OR MAY HAVE SIGNIFICANT IMPACT IN THE FUTURE ON THE COMPANY'S BUSINESS,
OPERATING RESULTS OR FINANCIAL CONDITIONS.

QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS. Our
revenues and operating results have varied widely in the past and we expect that
they will continue to vary significantly from quarter to quarter due to a number
of factors, including the following:

o demand for our software products and services

o the size and timing of our license transactions

o the level of product and price competition that we encounter

o the length of our sales cycle

o the timing of our new product introductions and enhancements and those of
our competitors

o market acceptance of our products

o changes in our pricing policies and those of our competitors

o announcements of new hardware platforms that may delay customer's
purchases

o variations in the length of our product implementation process

o the mix of product and services revenue

o the mix of distribution channels through which we license our software

o the mix of international and domestic revenue

o changes in our sales incentives

o changes in the renewal rate of our support agreements

o the life cycles of our products

o software defects and other product quality problems

o the expansion of our international operations

o the general economic and political conditions

o the budgeting cycles of our customers

Our software products are typically shipped when we receive orders.
Consequently, license backlog in any quarter generally represents only a small
portion of that quarter's revenue. As a result, license fee revenue is difficult
to forecast due to its dependence on orders received and shipped in that
quarter. We also recognize a substantial amount of our revenue in the last month
of each quarter and increasingly in the last week of the quarter. Because many
of our operating expenses are relatively fixed, a shortfall in anticipated
revenue or delay in recognizing revenue could cause our operating results to
vary significantly from quarter to quarter and could result in future operating
losses. The timing of large individual transactions is also difficult for us to
predict. In some cases, transactions have occurred in quarters subsequent to
those anticipated by us. To the extent one or more such transactions are lost or
occur later than we expected, operating results could be materially adversely
affected. If our revenues fall below our expectations in any particular quarter,
our business, operating results and financial condition could be materially
adversely affected.

We continue to experience significant seasonality with respect to software
license revenues. We recognize a disproportionately greater amount of revenue
for any fiscal year in our fourth quarter and an even greater proportion of net
income in the fourth quarter. As a result of this and our relatively fixed
operating expenses, our operating margins tend to be significantly higher in the
fourth fiscal quarter than other quarters. We believe this seasonality is
primarily the result of the efforts of our direct sales force to meet or exceed
fiscal year-end quotas and the tendency of certain of our customers to finalize
license contracts at or near our fiscal year end. Because

revenue, operating margins and net income are greater in the fourth quarter, any
shortfall in revenue, particularly license fee revenue, in the fourth quarter,
would have a disproportionately large adverse effect on our operating results
for the fiscal year. Additionally, our revenue and net income in the first
quarter is historically lower than in the preceding fourth quarter. Our first
fiscal quarter revenue also slows during the holiday season in November and
December. However, there can be no assurance that the fourth quarter of fiscal
1999 will have the same degree of seasonality in revenue and net income as in
prior years given the increased market focus on the Year 2000 and the adverse
market conditions.

As a result of the unpredictability of our revenue cycle, increasing
uncertainty in the ERP market attributed to many factors including issues
surrounding the Year 2000, global economic conditions, and strong competitive
forces we continue to have reduced visibility of future revenue and operating
results.

Due to the foregoing factors, we believe that quarter-to-quarter comparisons
of our operating results are not a good indication of our future performance. It
is likely that in some future quarter, our operating results may again be below
expectations of public market analysts or investors. In this event, the price of
our common stock may fall.

LIMITED DEPLOYMENT OF ONEWORLD AND ENTRANCE INTO NEW MARKETS. We first
shipped the OneWorld version of our application suites in late calendar 1996,
and as of July 31, 1999, over 400 of our customers had implemented OneWorld. Our
revenue growth depends on our ability to market OneWorld and to license it to
new customers. We do not anticipate generating much OneWorld license revenue
from our current WorldSoftware users. We have also found that it takes longer to
implement OneWorld than WorldSoftware. We believe that certain new customers may
not license OneWorld or may find it difficult to implement OneWorld because:

o customers may lack the necessary hardware, software or networking
infrastructure

o implementation may be too lengthy and/or costly for some customers

o OneWorld may not be perceived as competitive with other products on the
market

o defects or "bugs" may exist in OneWorld

With the introduction of OneWorld, we also entered new markets -- the NT and
UNIX markets. In order to be competitive in these markets, we must continue to
overcome obstacles such as competitors with significantly more experience and
name recognition, continue to establish relationships with third-party
implementation providers, and continue to add referenceable accounts in the open
systems market.

If we are unable to successfully license or implement OneWorld, our
reputation would be damaged and we would suffer material adverse effects to our
business, operating results and financial condition. Additionally, failure to
achieve success in marketing OneWorld could result in a drop in our stock price.

UNCERTAINTY OF NEW BUSINESS AREAS. The Company has recently expanded its
technology into a number of new business areas to foster long-term growth,
including electronic commerce, on-line business services and Internet computing.
These areas are relatively new to the Company's product development and sales
and marketing personnel. There can be no assurance that the Company will compete
effectively or will generate significant revenues in these new areas or that the
Company will be able to provide a product offering that will satisfy new
customer demands in these areas. The success of Internet computing and, in
particular, the Company's current Internet computing software products is
difficult to predict because Internet computing represents a method of computing
that is new to the entire computer industry.

COMPETITION. We compete in the ERP software solutions market. This market is
highly competitive, subject to rapid technological change and significantly
affected by new products. Our products are designed and marketed for the AS/400
and the NT and UNIX platforms. We compete with a large number of independent
software vendors including:

o companies offering other products that run on Windows NT- or UNIX-based
systems, such as SAP Aktiengesellschaft (SAP), Baan Company N.V. (Baan),
PeopleSoft, Inc. (PeopleSoft) and Oracle Corporation (Oracle)

o companies offering other products on the AS/400 platform, such as System
Software Associates, Inc., Mapics, Inc. and Infinium Software, Inc.

o companies offering either standard or fully customized products that run
on mainframe computer systems, such as SAP, which we do not offer

In addition, we compete with suppliers of custom developed business
applications software, such as systems consulting groups of major accounting
firms and IT departments of potential customers. There can be no assurances that
we will be able to successfully compete with new or existing competitors or that
such competition will not materially adversely effect our business, operating
results or financial condition.

Some of our competitors, SAP and Oracle in particular, have significantly
greater financial, technical, marketing and other resources than we do. In
addition, they have wider name recognition and a larger installed customer base.
In contrast, we entered the NT and UNIX markets only two years ago. SAP, Baan,
PeopleSoft and Oracle have significantly more experience and name recognition
with NT and UNIX implementations and platforms and have more referenceable
accounts. Such competitors also have substantially more customers than we have
in the NT and UNIX markets. Additionally, several of our competitors have
well-established relationships with our current or potential customers. These
relationships may prevent us from competing effectively in divisions or
subsidiaries of such customers. Many of our competitors have also announced
their intention to offer vertical applications to mid-sized organizations, which
is the market that comprises a substantial portion of our revenue. There can be
no assurances that we can successfully compete against any of these competitors.
Further, several of our competitors regularly and significantly discount prices
on their products. If our competitors continue to discount or increase the
frequency of their discounts, we may be required to similarly discount our
products. This could have a material adverse effect on our operating margins.

We continue to rely on a number of firms that provide systems consulting,
systems integration, services implementation and customer support services and
that recommend our products during the evaluation stage by potential customers.
A number of our competitors have more well-established relationships with such
firms, and as a result, such firms may be more likely to recommend our
competitors' products over our products. It is also possible that these third
parties will market software products that compete with our products in the
future. If we are unable to maintain or increase our relationships with these
third parties that recommend, implement or support our software, our business,
operating results and financial condition may be materially adversely affected.

We believe that the following are the principal competitive factors
affecting the market for our software products:

o responsiveness to customers' needs

o product flexibility and ability to handle business changes

o product functionality

o speed of implementation

o ease of use

o product performance and features

o product quality and reliability

o vendor and product reputation

o quality of customer support

o overall cost

We believe that we compete favorably with respect to the above factors. In
order to be successful in the future, we must continue to respond promptly and
effectively to the challenges of technological change and our competitors'
innovations. We cannot guarantee that our products will continue to compete
favorably or that we will be successful in facing the increasing competition
from new products and enhancements introduced by our existing competitors or new
companies entering the market.

COMPANY DEPENDENCE ON IBM AS/400 PLATFORM. We continue to be dependent upon
the market for software products on the IBM AS/400 platform. Most of the revenue
for fiscal 1997 and a substantial portion for 1998 was derived from the
licensing of our software product and related services for the AS/400 market.
However, during the first three quarters of fiscal 1999, our percentage of
revenue from the AS/400 continued to decline as our percentage of revenue from
the non-AS/400 market continued to increase.

We will continue to offer enhanced software products for the AS/400 market, but
there is no guarantee that our customers will buy or support these enhanced
software products.

The AS/400 market is expected to grow at a minimal rate and there can be no
assurance that it will grow at all in the future. Our future growth depends, in
part, on our ability to gain market share. There can be no assurance that we can
maintain or increase our relative share of the AS/400 market. As we continue to
focus more on our OneWorld software version, it may become more difficult to
gain market share with the AS/400 users. We introduced OneWorld, our software
version that runs on leading NT and UNIX servers as well as on the AS/400, in
late calendar 1996. If we lose AS/400 installed base customers or AS/400 market
share, we may suffer material adverse affects to our business, operating results
or financial condition.

INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS. We market and sell our
products in the United States and internationally. Our international revenue
continues to represent a significant portion of our total revenue. We currently
maintain 43 international sales offices located throughout Canada, Europe, Asia,
Latin America and Africa. We intend to continue to substantially expand our
international operations and enter new international markets. This expansion
will require significant management attention and financial resources.
Traditionally, our international operations are characterized by higher
operating expenses and lower operating margins. As a result, if our
international revenue increases as a percentage of total revenue, our operating
margins may be adversely affected. Additionally, costs associated with
international expansion include the establishment of additional offices, hiring
of additional personnel, localization and marketing of our products in foreign
markets, and the development of relationships with international service
providers. If international revenue is not adequate to offset the expense of
expanding foreign operations, our business, operating results and financial
condition could be materially adversely affected. Our international operations
are also subject to other inherent risks, including:

o imposition of governmental controls

o export license requirements

o restrictions on the export of certain technology

o cultural and language difficulties

o the impact of a recessionary environment in economies outside the United
States

o reduced protection for intellectual property rights in some countries

o the potential exchange and repatriation of foreign earnings

o political instability

o trade restrictions and tariff changes

o localization and translation of products

o difficulties in staffing and managing international operations

o difficulties in collecting accounts receivable and longer collection
periods

o the impact of local economic conditions and practices

Our success in expanding our international operations depends, in part, on
our ability to anticipate and effectively manage these and other risks. We
cannot guarantee that these or other factors will not materially adversely
affect our business, operating results or financial condition.

We have assessed and continue to closely monitor our international business
risks due to the deterioration of global economic conditions in the Asian
markets, particularly in Japan, and in certain other geographic regions.
Consistent with our historical results, we expect to continue to recognize a
small percentage of our revenue and operating income from Asian and other
specific geographic areas that are currently being impacted by adverse economic
conditions. With our worldwide performance being impacted by certain adverse
economic conditions and the increased market focus on Year 2000 compliance, our
international investments may not be mitigated by the broad geographic diversity
of our operations. As a result, our investment in certain international areas
could have a material adverse effect on our financial condition and results of
operations if such conditions continue or worsen.

A significant portion of our revenue is received in currencies other than
United States dollars and as a result we are subject to risks associated with
foreign exchange rate fluctuations. We have recently broadened our foreign
exchange hedging activities to limit our exposure risk. In the third fiscal
quarter of 1998 and 1999, we incurred foreign exchange losses of approximately
$796,000 and $1,074,000, respectively. Due to the substantial volatility of
foreign exchange rates, there can be no assurance that our hedging activities
will effectively limit our exposure or that such fluctuations will not a have a
material adverse effect on our business, operating results or financial
condition.

INTEGRATION OF NUMETRIX AND THE PREMISYS CORPORATION ACQUISITIONS. The
inability of the Company to complete the in-process development projects within
the expected schedule could materially impact future revenue and earnings as
management believes these supply chain solutions are integral to its ability to
remain competitive in the extended ERP market.

ECONOMIC AND MARKET CONDITION RISKS. Various segments of the software
industry have experienced significant economic downturns characterized by
decreased product demand, price erosion, work slowdown and layoffs. In addition,
there is increasing uncertainty in the ERP market attributed to many factors
including issues surrounding the Year 2000, global economic conditions and
strong competitive forces. Our future license fee revenue and results of
operations may experience substantial fluctuations from period to period as a
consequence of these factors and such conditions may affect the timing of orders
from major customers and other factors affecting capital spending. Although we
have a diverse client base, we have targeted a number of vertical markets. As a
result, any economic downturns in general or in our targeted vertical markets
would have a material adverse effect on our business, operating results or
financial condition.

OTHER RISKS. For a more complete description of risk factors see "Factors
Affecting the Company's Business, Operating Results and Financial Condition" in
the Company's Annual Report on Form 10-K for the fiscal year ended October 31,
1998.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

In the ordinary course of its operations, the Company is exposed to certain
market risks, primarily changes in foreign currency exchange rates and interest
rates. Uncertainties that are either nonfinancial or nonquantifiable, such as
political, economic, tax, other regulatory or credit risks are not included in
the following assessment of the Company's market risks.

FOREIGN CURRENCY EXCHANGE RATES. Operations outside of the U.S. expose the
Company to foreign currency exchange rate changes and could impact translations
of foreign denominated assets and liabilities into U.S. dollars and future
earnings and cash flows from transactions denominated in different currencies.
During the first nine months of fiscal 1999, 38% of the Company's total revenue
was generated from its international operations, and the net assets of the
Company's foreign subsidiaries totaled 12% of consolidated net assets as of July
31, 1999. The Company's exposure to currency exchange rate changes is
diversified due to the number of different countries in which it conducts
business. The Company operates outside the U.S. primarily through wholly-owned
subsidiaries in Europe, Africa, Asia, Canada and Latin America. These foreign
subsidiaries use the local currency or, more recently in Europe, the euro as
their functional currency as sales are generated and expenses are incurred in
such currencies.

The Company enters into forward foreign exchange contracts to hedge the
effects of exchange rate changes on cash exposures from receivables and payables
denominated in foreign currencies. Such hedging activities cannot completely
protect the Company from the risk of foreign currency losses due to the number
of currencies in which it conducts business, the volatility of currency rates,
and the constantly changing currency exposures. Foreign currency gains and
losses will continue to result from fluctuations in the value of the currencies
in which the Company conducts its operations as compared to the U.S. dollar, and
future operating results will be affected to some extent by gains and losses
from foreign currency exposure. At July 31, 1999, the Company had approximately
$38.8 million of gross U.S. dollar equivalent forward foreign exchange contracts
outstanding as hedges of monetary assets and liabilities denominated in foreign
currency.

The Company prepared sensitivity analyses of its exposures from forward
foreign exchange contracts as of July 31, 1999 to assess the impact of
hypothetical changes in foreign currency rates. The Company's analysis assumed a
10% adverse change in foreign currency rates in relation to the U.S. dollar. At
July 31, 1999, there was not a material change in the sources or the estimated
effects of foreign currency rate exposures from the Company's quantitative and
qualitative disclosures presented in Form 10-K for the year ended October 31,
1998. A 10% adverse change in foreign currency rates from the July 31, 1999
rates could result in approximately a $2.5 million effect. Due to the Company's
slowing revenue growth and management's revised expectations for fiscal 1999
operating results, such an adverse change could result in a material impact to
the Company's results of operations, cash flows and financial condition for a
future quarter and the full fiscal year ending October 31, 1999.

INTEREST RATES. Investments, including cash equivalents, consist of U.S.,
state and municipal bonds, as well as domestic corporate bonds, with maturities
of up to thirty months. All investments are classified as held-to-maturity as
defined in SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," and accordingly are carried at amortized cost. Additionally, the
Company has lease obligations calculated as a return on the lessor's costs of
funding based on LIBOR and adjusted from time to time to reflect any changes in
the Company's leverage ratio. Changes in interest rates could impact the
Company's anticipated interest income and lease obligations or could impact the
fair market value of its investments.

The Company prepared sensitivity analyses of its interest rate exposures and
its exposure from anticipated investment and borrowing levels for fiscal 1999 to
assess the impact of hypothetical changes in interest rates. At July 31, 1999,
there was not a material change in the sources or the estimated effects of
interest rate exposures from the Company's quantitative and qualitative
disclosures presented in Form 10-K for the year ended October 31, 1998.
Additionally, based upon the results of these analyses, a 10% adverse change in
interest rates from the July 31, 1999 rates would not have a material adverse
effect on the fair value of investments and would not materially impact the
Company's results of operations, cash flows or financial condition for the
fiscal year ending October 31, 1999.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In addition, from time to time, the Company is involved in legal proceedings
and litigation arising in the ordinary course of business. While the outcome of
these matters cannot be predicted with certainty, in the opinion of management,
the adverse outcome of any such current legal proceedings, other than as
discussed above, would not have a material adverse effect on the Company's
business, operating results or financial condition.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.13 Share Purchase Agreement by and among J.D. Edwards & Company,
J.D. Edwards Nova Scotia Company, Numetrix Limited, Numetrix
Holdings B.V., Numetrix Holdings, S.A., The St. Michael's Trust
Corporation, as Trustee of the Schegili Trust, and Josef J.
Schengili

27.1 Financial Data Schedule

(b) Reports on Form 8-K

None.

SIGNATURES

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

J.D. EDWARDS & COMPANY

By: /s/ RICHARD E. ALLEN
----------------------------------------
Name: Richard E. Allen
Title: Chief Financial Officer, Senior Vice
President, Finance and Administration and
Director (principal financial officer)

Dated: September 13, 1999

By: /s/ PAMELA L. SAXTON
----------------------------------------
Name: Pamela L. Saxton
Title: Vice President of Finance, Controller
and Chief Accounting Officer
(principal accounting officer)

Dated: September 13, 1999
30
EXHIBIT INDEX

Exhibit
Number Description
- ------ -----------

27.1 Financial Data Schedule