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

                                    FORM 10-Q
                                   (Mark One)
     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                For the quarterly period ended November 30, 2002
                                       OR
          [ ] 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 0-22154

                             MANUGISTICS GROUP, INC.
             (Exact name of Registrant as specified in its charter)

                 Delaware                           52-1469385
        (State or other jurisdiction of         (I.R.S. Employer
        incorporation or organization)        Identification Number)

                 9715 Key West Avenue, Rockville, Maryland 20850
               (Address of principal executive office) (Zip code)
                                 (301) 255-5000
              (Registrant's telephone number, including area code)


Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 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
                                   ----------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: approximately 70.1 million
shares of common stock, $.002 par value, as of January 7, 2003.


                                       1


MANUGISTICS GROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS



PART I       FINANCIAL INFORMATION                                                         PAGE
                                                                                           ----
                                                                                     
Item 1.      Financial Statements

             Condensed Consolidated Balance Sheets (Unaudited) -                             3
             November 30, 2002 and February 28, 2002

             Condensed Consolidated Statements of Operations (Unaudited) -                   4
             Three and nine months ended November 30, 2002 and 2001

             Condensed Consolidated Statements of Cash Flows (Unaudited) -                   5
             Nine months ended November 30, 2002 and 2001

             Notes to Condensed Consolidated Financial Statements (Unaudited) -              6
             November 30, 2002

Item 2.      Management's Discussion and Analysis of Financial Condition and Results of     15
             Operations

Item 3.      Quantitative and Qualitative Disclosure About Market Risk                      43

Item 4.      Controls and Procedures                                                        44

PART II      OTHER INFORMATION

Item 5.      Other Information                                                              44

Item 6.      Exhibits and Reports on Form 8-K                                               44

             SIGNATURES                                                                     46

             CERTIFICATIONS -SECTION 302                                                    47



                                       2


                         PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                        (IN THOUSANDS, EXCEPT PAR VALUE)



                                                                           November 30,     February 28,
                                                                               2002            2002
                                                                           ------------     ------------
                                                                                      
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                              $ 127,468       $ 228,801
     Marketable securities                                                      5,315           4,259
                                                                            ---------       ---------
         Total cash, cash equivalents and marketable securities               132,783         233,060
     Accounts receivable, net of allowance for doubtful accounts of
         $8,836 and $8,308 at November 30, 2002 and February 28, 2002,
         respectively                                                          63,922          76,443
     Deferred tax assets                                                           --           9,061
     Other current assets                                                      10,203          11,471
                                                                            ---------       ---------
         Total current assets                                                 206,908         330,035

NON-CURRENT ASSETS:
     Property and equipment, net of accumulated depreciation                   32,616          22,872
     Software development costs, net of accumulated amortization               13,416          14,506
     Restricted cash                                                           14,096              --
     Goodwill, net of accumulated amortization                                283,613         269,998
     Acquired technology, net of accumulated amortization                      44,724          36,086
     Other intangible assets and non-current assets, net of
         accumulated amortization                                              31,234          37,854
     Deferred tax assets                                                           --          11,289
                                                                            ---------       ---------

TOTAL ASSETS                                                                $ 626,607       $ 722,640
                                                                            =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                       $   9,919       $   9,009
     Accrued compensation                                                       6,566          12,720
     Deferred revenue                                                          35,204          43,578
     Accrued liabilities and other                                             28,836          27,777
                                                                            ---------       ---------
         Total current liabilities                                             80,525          93,084
                                                                            ---------       ---------

NON-CURRENT LIABILITES:
     Convertible debt                                                         250,000         250,000
     Long-term debt and capital leases                                          4,939           1,023
     Other non-current liabilities                                              9,954           5,726
                                                                            ---------       ---------
         Total non-current liabilities                                        264,893         256,749
                                                                            ---------       ---------

COMMITMENTS AND CONTINGENCIES (NOTE 4)
STOCKHOLDERS' EQUITY:
     Preferred stock                                                               --              --
     Common stock, $.002 par value per share; 300,000 shares
         authorized; 69,880 and 69,042 issued and outstanding at
         November 30, 2002 and February 28, 2002, respectively                    140             138
     Additional paid-in capital                                               632,959         629,861
     Deferred compensation                                                     (3,534)         (9,049)
     Accumulated other comprehensive loss                                      (2,137)         (2,704)
     Accumulated deficit                                                     (346,239)       (245,439)
                                                                            ---------       ---------

         Total stockholders' equity                                           281,189         372,807
                                                                            ---------       ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $ 626,607       $ 722,640
                                                                            =========       =========


See accompanying notes to the condensed consolidated financial statements.


                                       3


                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                                  THREE MONTHS                   NINE MONTHS
                                                                               ENDED NOVEMBER 30,             ENDED NOVEMBER 30,
                                                                               2002          2001            2002            2001
                                                                            ---------     ---------       ---------       ---------
                                                                                                              
REVENUE:
     Software                                                               $  14,084     $  22,150       $  56,712       $  92,015
     Services                                                                  25,132        27,575          79,614          82,629
     Support                                                                   20,412        19,020          61,867          54,875
     Reimbursed expenses                                                        2,736         2,266           8,700           7,708
                                                                            ---------     ---------       ---------       ---------
         Total revenue                                                         62,364        71,011         206,893         237,227
                                                                            ---------     ---------       ---------       ---------

OPERATING EXPENSES:
Cost of revenue:
     Cost of software                                                           4,365         4,750          15,495          14,848
     Amortization of acquired technology                                        3,576         2,654          10,064           6,553
                                                                            ---------     ---------       ---------       ---------
     Total cost of software                                                     7,941         7,404          25,559          21,401
                                                                            ---------     ---------       ---------       ---------

     Cost of services and support                                              23,707        23,598          74,809          71,212
     Cost of reimbursed expenses                                                2,736         2,266           8,700           7,708
     Non-cash stock compensation expense (benefit) for cost of
         services and support                                                     390           535           1,296            (390)
                                                                            ---------     ---------       ---------       ---------
     Total cost of services and support                                        26,833        26,399          84,805          78,530
                                                                            ---------     ---------       ---------       ---------

 Sales and marketing                                                           20,593        26,889          75,849          91,002
 Non-cash stock compensation expense (benefit) for sales and marketing            209           537             718          (2,166)
                                                                            ---------     ---------       ---------       ---------
 Total cost of sales and marketing                                             20,802        27,426          76,567          88,836
                                                                            ---------     ---------       ---------       ---------

 Product development                                                           14,095        17,232          48,308          53,993
 Non-cash stock compensation expense (benefit) for product development             59           115             244          (1,393)
                                                                            ---------     ---------       ---------       ---------
 Total cost of product development                                             14,154        17,347          48,552          52,600
                                                                            ---------     ---------       ---------       ---------

 General and administrative                                                     7,056         6,375          21,338          21,170
 Non-cash stock compensation expense (benefit) for general and
    administrative                                                                 96           116             418            (211)
                                                                            ---------     ---------       ---------       ---------
 Total cost of general and administrative                                       7,152         6,491          21,756          20,959
                                                                            ---------     ---------       ---------       ---------

Amortization of intangibles                                                     1,005        21,800           2,861          62,730
Restructuring and impairment charges                                            8,159         4,193          16,996           6,612
Purchased research and development                                                 --            --           3,800              --
IRI settlement                                                                     --         3,115              --           3,115
                                                                            ---------     ---------       ---------       ---------
Total operating expenses                                                       86,046       114,175         280,896         334,783
                                                                            ---------     ---------       ---------       ---------

LOSS FROM OPERATIONS                                                          (23,682)      (43,164)        (74,003)        (97,556)
OTHER EXPENSE, NET                                                             (1,629)      (12,250)         (5,348)        (12,433)
                                                                            ---------     ---------       ---------       ---------
LOSS BEFORE INCOME TAXES                                                      (25,311)      (55,414)        (79,351)       (109,989)
PROVISION FOR (BENEFIT FROM) INCOME TAXES                                         692       (10,434)         21,450         (19,919)
                                                                            ---------     ---------       ---------       ---------
NET LOSS                                                                    $ (26,003)    $ (44,980)      $(100,801)      $ (90,070)
                                                                            =========     =========       =========       =========


BASIC AND DILUTED LOSS PER SHARE                                            $   (0.37)    $   (0.66)      $   (1.45)      $   (1.33)

SHARES USED IN BASIC AND DILUTED LOSS PER SHARE COMPUTATION
                                                                               69,876        68,142          69,683          67,736


See accompanying notes to the condensed consolidated financial statements.

                                       4



                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)



                                                                        Nine Months Ended November 30,
                                                                             2002            2001
                                                                          ---------       ---------
                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                  $(100,801)      $ (90,070)
Adjustments to reconcile net loss to net cash used in operating
  activities:
     Depreciation and amortization                                           31,718          84,384
     Amortization of debt issuance costs                                        859             855
     Purchased research and development                                       3,800              --
     Deferred income taxes                                                   20,350         (22,389)
     Non-cash stock compensation expense (benefit)                            2,677          (4,160)
     Loss on investments                                                         42          10,604
     Asset impairment charges                                                 2,484              --
     Other                                                                      249           1,034
     Changes in assets and liabilities:
         Accounts receivable                                                 15,491           7,057
         Other assets                                                         1,476           2,002
         Accounts payable                                                        63          (1,253)
         Accrued compensation                                                (7,612)         (9,559)
         Other liabilities                                                    4,096          (3,089)
         Deferred revenue                                                   (11,802)         (1,055)
                                                                          ---------       ---------
             Net cash used in operating activities                          (36,910)        (25,639)
                                                                          ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
     Acquisitions, net of cash acquired                                     (32,063)        (30,644)
     Restricted cash                                                        (14,096)             --
     Investment in business                                                      --         (10,150)
     Proceeds from sale of investment                                            --             362
     (Purchases) sales of marketable securities, net                         (1,056)         90,254
     Purchases of property and equipment                                    (13,539)         (8,323)
     Capitalization and purchases of software                                (8,868)        (10,674)
                                                                          ---------       ---------
             Net cash (used in) provided by investing activities            (69,622)         30,825
                                                                          ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
     Borrowings on line of credit                                             2,310              --
     Payments of long-term debt, capital lease obligations and
         convertible debt issuance costs                                     (2,118)           (296)
     Proceeds from exercise of stock options and employee stock plan
         purchases                                                            4,617           8,567
                                                                          ---------       ---------
             Net cash provided by financing activities                        4,809           8,271
                                                                          ---------       ---------

EFFECTS OF EXCHANGE RATES ON CASH  BALANCES                                     390          (1,018)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                       (101,333)         12,439
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              228,801         196,362
                                                                          ---------       ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $ 127,468       $ 208,801
                                                                          =========       =========


See accompanying notes to the condensed consolidated financial statements.


                                       5



                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                NOVEMBER 30, 2002

1.   The Company and Basis of Presentation

     THE COMPANY

               Manugistics Group, Inc. (the "Company") is a leading global
          provider of supply chain management (SCM) and pricing and revenue
          optimization (PRO) solutions. The Company also provides solutions for
          supplier relationship management (SRM) and service and parts
          management (S&PM). Our solutions help companies lower operating costs,
          improve customer service, increase revenue, enhance profitability and
          accelerate revenue and earnings growth.

     BASIS OF PRESENTATION

               The accompanying unaudited condensed consolidated financial
          statements of the Company and its wholly-owned subsidiaries have been
          prepared in accordance with generally accepted accounting principles
          for interim reporting and in accordance with the instructions to the
          Quarterly Report on Form 10-Q and Article 10 of Regulation S-X.
          Accordingly, they do not include all of the information and notes
          required by generally accepted accounting principles for complete
          financial statements. In the opinion of management, all adjustments
          which are necessary for a fair presentation of the unaudited results
          for the interim periods presented have been included. The results of
          operations for the periods presented herein are not necessarily
          indicative of the results of operations for the entire fiscal year,
          which ends on February 28, 2003.

               These financial statements should be read in conjunction with the
          financial statements and notes thereto for the fiscal year ended
          February 28, 2002 included in the Annual Report on Form 10-K of the
          Company for that year filed with the Securities and Exchange
          Commission.

     RECLASSIFICATION

               Certain prior year information has been reclassified to conform
          to the current year presentation.

2.   New Accounting Pronouncements

               On March 1, 2002, the Company adopted the provisions of Statement
          of Financial Accounting Standards No. 141 ("SFAS 141") "Business
          Combinations," and Statement of Financial Accounting Standards No. 142
          ("SFAS 142") "Goodwill and Other Intangible Assets," with the
          exception of the immediate requirement to use the purchase method of
          accounting for all business combinations initiated after June 30,
          2001. SFAS 141 establishes new standards for accounting and reporting
          for business combinations and requires that the purchase method of
          accounting be used for all business combinations initiated after June
          30, 2001. SFAS 142 requires goodwill and certain intangible assets to
          remain on the balance sheet and not be amortized. Therefore, the
          Company stopped amortizing goodwill, including goodwill recorded in
          past business combinations, on March 1, 2002. In addition, SFAS 142
          requires assembled workforce and certain other identifiable intangible
          assets to be reclassified as goodwill. On an annual basis, and when
          there is reason to suspect that values may have been impaired,
          goodwill must be tested for impairment and write-downs may be
          necessary. SFAS 142 changes the accounting for goodwill from an
          amortization method to an impairment-only approach. SFAS 142 also
          requires recognized intangible assets with finite lives to be
          amortized over their respective estimated useful lives and reviewed
          for impairment in accordance with Statement of Financial Accounting
          Standards No. 144 ("SFAS 144") "Accounting for the Impairment of
          Long-Lived Assets."

               SFAS 142 required the Company to perform an assessment of whether
          there was an indication that goodwill was impaired at the date of
          adoption. To accomplish this, the Company identified its reporting
          units and determined the carrying value of each reporting unit by
          assigning the assets and liabilities, including existing goodwill and
          intangible assets, to those reporting units as of the date of
          adoption. The first test for potential impairment requires the Company
          to determine the fair value of each reporting unit and compare it to
          the reporting unit's carrying amount. To the extent the reporting
          unit's carrying amount exceeds its fair value, an indication exists
          that the reporting unit's goodwill may be impaired and the Company
          must perform the second step of the impairment test. In the second
          step, the Company must compare the implied


                                       6


          fair value (which includes factors such as, but not limited to, the
          Company's market capitalization, control premium and recent stock
          price volatility) of the reporting unit's goodwill, determined by
          allocating the reporting unit's fair value to all of its assets and
          liabilities in a manner similar to a purchase price allocation in
          accordance with SFAS 141, to its carrying amount, both of which would
          be measured as of the date of adoption.

               The Company performed the initial goodwill impairment test
          required by SFAS 142 during the first quarter of fiscal 2003. The
          Company considers itself to have a single reporting unit. Accordingly,
          all of our goodwill is associated with the entire Company. As of March
          1, 2002, based on the Company's implied fair value, there was no
          impairment of goodwill. The Company will continue to test for
          impairment on an annual basis, coinciding with our fiscal year end, or
          on an interim basis if circumstances change that would more likely
          than not reduce the fair value of the Company's reporting unit to
          below its carrying amount.

               During the quarters ended August 31, 2002 and November 30, 2002,
          we experienced adverse changes in our stock price resulting from a
          decline in our financial performance and adverse business conditions
          that have affected the technology industry, especially application
          software companies. Based on these factors, we performed a test for
          goodwill impairment at August 31, 2002 and November 30, 2002 and
          determined that based upon the implied fair value (which includes
          factors such as, but not limited to, the Company's market
          capitalization, control premium and recent stock price volatility) of
          the Company as of August 31, 2002 and November 30, 2002, there was no
          impairment of goodwill. We will continue to test for impairment on an
          annual basis, coinciding with our fiscal year end, or on an interim
          basis if circumstances change that would more likely than not reduce
          the fair value of our reporting unit below its carrying value. If our
          stock price remains near or lower than recent levels such that the
          implied fair value of the Company is significantly less than
          stockholders' equity for a sustained period of time, among other
          factors, we may be required to record an impairment loss related to
          goodwill below its carrying amount. We will perform a test for
          goodwill impairment at February 28, 2003, which is our annual date for
          goodwill impairment review.

               Effective March 1, 2002, as required by SFAS 142, we have ceased
          amortization of goodwill associated with acquisitions completed prior
          to July 1, 2001. Goodwill and intangible assets acquired in business
          combinations initiated before July 1, 2001 were amortized until
          February 28, 2002. SFAS 142 does not require the restatement of prior
          period earnings, but does require transitional disclosure for earnings
          per share and adjusted net income under the revised rules (see Note
          5).

               On March 1, 2002, the Company adopted the provisions of SFAS 144.
          SFAS 144 addresses financial accounting and reporting for the
          impairment or disposal of long-lived assets. SFAS 144 supersedes
          Statement of Financial Accounting Standards No. 121 ("SFAS 121")
          "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
          Assets to be Disposed Of," but retains the fundamental provisions of
          SFAS 121 for (i) recognition/measurement of impairment of long-lived
          assets to be held and used and (ii) measurement of long-lived assets
          to be disposed of by sale. SFAS 144 also supersedes the accounting and
          reporting provisions of Accounting Principles Board's Opinion No. 30
          ("APB 30"), "Reporting the Results of Operations -- Reporting the
          Effects of Disposal of a Segment of a Business, and Extraordinary,
          Unusual and Infrequently Occurring Events and Transactions," for
          segments of a business to be disposed of but retains APB 30's
          reporting requirement to report discontinued operations separately
          from continuing operations and extends that reporting requirement to a
          component of an entity that either has been disposed of or is
          classified as held for sale. Adoption of this standard did not have a
          material impact on the Company's financial statements.

               On March 1, 2002, the Company adopted the provisions of Staff
          Announcement Topic No. D-103 "Income Statement Characterization of
          Reimbursements Received for "Out-of-Pocket" Expenses Incurred," which
          was subsequently incorporated in Emerging Issues Task Force No. 01-14
          ("EITF 01-14"). EITF 01-14 establishes that reimbursements received
          for "out-of-pocket" expenses such as airfare, hotel stays and similar
          costs should be characterized as revenue in the income statement.
          Adoption of the guidance had the resulting effect of increased revenue
          and increased operating expenses. Prior to our adoption of this
          standard, the Company recorded "out-of-pocket" expense reimbursements
          as a reduction of cost of services. Accordingly, the Company
          reclassified these amounts to revenue in our comparative financial
          statements beginning in our first quarter of fiscal 2003. Application
          of EITF 01-14 did not result in any net impact to operating income or
          net income in any past periods and will not result in any net impact
          in future periods.

               In June 2002, the FASB issued Statement of Financial Accounting
          Standards No. 146 ("SFAS 146"), "Accounting for Costs Associated with
          Exit or Disposal Activities." SFAS 146 nullifies Emerging Issues Task
          Force Issue No. 94-3 ("EITF


                                       7


          94-3"), "Liability Recognition for Certain Employee Termination
          Benefits and Other Costs to Exit an Activity (including Certain Costs
          Incurred in a Restructuring)." SFAS 146 requires that a liability for
          a cost associated with an exit or disposal activity be recognized when
          the liability is incurred. Under EITF 94-3, a liability for an exit
          cost was recognized at the date of a company's commitment to an exit
          plan. SFAS 146 eliminates the definition and requirements for
          recognition of exit costs in EITF 94-3 and also establishes that fair
          value is the objective for initial measurement of the liability. We
          will adopt the provisions of SFAS 146 for exit or disposal activities,
          if any, that are initiated after December 31, 2002 in accordance with
          the transition rules. Companies may not restate previously issued
          financial statements for the effect of the provisions of SFAS 146 and
          liabilities that a company previously recorded under EITF 94-3 are not
          effected. The effects of adoption would relate solely to exit or
          disposal activities undertaken after December 31, 2002.

3.   Net Loss Per Share

               Basic net loss per share is computed using the weighted average
          number of shares of common stock outstanding. Diluted net loss per
          share is computed using the weighted average number of shares of
          common stock and, when dilutive, potential common shares from options
          and warrants to purchase common stock using the treasury stock method,
          the effect of the assumed conversion of the Company's convertible
          subordinated debt and the effect of the potential issuance of common
          stock in connection with acquisitions. The dilutive effect of options
          and warrants of 0.1 million shares and 2.8 million shares for the
          three month periods ended November 30, 2002 and 2001, respectively,
          and 2.7 million shares and 5.5 million shares for the nine month
          periods ended November 30, 2002 and 2001, respectively, were excluded
          from the calculation of diluted net loss per share because including
          these shares would be anti-dilutive due to the Company's reported net
          loss. The assumed conversion of the Company's convertible debt was
          excluded from the computation of diluted net loss per share for the
          three and nine months ended November 30, 2002 and 2001 since it was
          anti-dilutive. The Company's convertible debt may be exchanged for up
          to approximately 5.7 million shares of the Company's common stock in
          future periods.

4.   Commitments and Contingencies

               The Company is involved in disputes and litigation in the normal
          course of business. The Company does not believe that the outcome of
          existing disputes or litigation will have a material effect on the
          Company's business, operating results, financial condition or cash
          flows. The Company has established accruals for losses related to such
          matters that are probable and reasonably estimable. However, an
          unfavorable outcome of some or all of these matters could have a
          material effect on the Company's business, operating results,
          financial condition and cash flows.

5.   Intangible Assets and Goodwill

               Intangible assets subject to amortization as of November 30, 2002
          and February 28, 2002 were as follows (amounts in thousands):



                                              ACCUMULATED
                              GROSS ASSETS    AMORTIZATION      NET ASSETS
                              ------------    ------------      ----------
                                                        
NOVEMBER 30, 2002
  Acquired technology           $ 65,351        $(20,627)        $ 44,724
  Customer relationships          28,982          (7,322)          21,660
                                --------        --------         --------
Total                           $ 94,333        $(27,949)        $ 66,384
                                ========        ========         ========

FEBRUARY 28, 2002
  Acquired technology           $ 46,639        $(10,553)        $ 36,086
  Customer relationships          22,491          (4,368)          18,123
                                --------        --------         --------
Total                           $ 69,130        $(14,921)        $ 54,209
                                ========        ========         ========


               The changes in the carrying amount of goodwill for the nine
          months ended November 30, 2002 are as follows (amounts in thousands):



                                                                     NET ASSETS
                                                                     ----------
                                                                   
BALANCE AS OF FEBRUARY 28, 2002                                       $269,998
  Reclassification of assembled workforce as required by SFAS 142        7,101
  WDS and DFE acquisitions (see Note 7)                                  5,547
  Other                                                                    967
                                                                      --------
BALANCE AS OF  NOVEMBER 30, 2002                                      $283,613
                                                                      ========



                                       8


               Amortization expense related to goodwill and other intangible
          assets was $4.6 million and $24.5 million for the three months ended
          November 30, 2002 and 2001, respectively, and $12.9 million and $69.3
          million for the nine months ended November 30, 2002 and 2001,
          respectively. Estimated aggregate future amortization expense for
          intangible assets remaining for the three-month period ending February
          28, 2003 and future fiscal years are as follows (amounts in
          thousands):



                            THREE MONTHS
                         ENDING FEBRUARY 28,              FISCAL YEAR ENDING FEBRUARY 28 OR 29,
                         -------------------              -------------------------------------
                                2003           2004      2005        2006      2007     THEREAFTER     TOTAL
                                ----           ----      ----        ----      ----     ----------     -----
                                                                                
Amortization expense          $ 4,581        $ 18,182   $ 17,205   $ 10,753   $ 9,889     $ 5,774    $ 66,384


               Summarized below are the effects on net loss and net loss per
          share data, if the Company had followed the amortization provisions of
          SFAS 142 for all periods presented (amounts in thousands, except per
          share data):



                                                   For the three months           For the nine months
                                                    ended November 30,             ended November 30,
                                                  -----------------------       -------------------------
                                                    2002           2001              2002          2001
                                                  --------       --------       -----------      --------
                                                                                     
Net loss:
  As reported                                     $(26,003)      $(44,980)      $  (100,801)     $(90,070)
  Add: goodwill and assembled workforce
    amortization, net of taxes                          --         18,660                --        55,964
                                                  --------       --------       -----------      --------
Net loss, pro forma                               $(26,003)      $(26,320)      $  (100,801)      (34,106)
                                                  ========       ========       ===========      ========

Basic and diluted loss per share:
  As reported                                     $  (0.37)      $  (0.66)      $     (1.45)     $  (1.33)
  Add: goodwill and assembled workforce
    amortization, net of taxes                          --       $   0.27                --      $   0.83
                                                  --------       --------       -----------      --------
Basic and diluted loss per share, pro forma       $  (0.37)      $  (0.39)      $     (1.45)     $  (0.50)
                                                  ========       ========       ===========      ========

Shares used in basic and diluted loss
    per share calculation                           69,876         68,142            69,683        67,736


     Please refer to Note 2 for further discussion of SFAS 142.

6.   Comprehensive Loss

               Other comprehensive (loss) income relates to foreign currency
          translation adjustment and unrealized gains (losses) on investments in
          marketable securities. The following table sets forth the
          comprehensive loss for the three and nine month periods ended November
          30, 2002 and 2001, respectively (amounts in thousands):



                                    Three months ended November 30,  Nine months ended November 30,
                                          2002            2001            2002            2001
                                       ---------       ---------       ---------       ---------
                                                                           
Net loss                               $ (26,003)      $ (44,980)      $(100,801)      $ (90,070)
Other comprehensive (loss) income           (963)             24             567          (1,621)
                                       ---------       ---------       ---------       ---------
     Total comprehensive loss          $ (26,966)      $ (44,956)      $(100,234)      $ (91,691)
                                       =========       =========       =========       =========


7.   Acquisitions

     Western Data Systems of Nevada, Inc.

               On April 26, 2002, the Company acquired certain assets and
          assumed certain liabilities of WDS for $26.2 million in cash. WDS was
          a leading provider of application software and services to 135
          customers in commercial aerospace, defense and maritime industries and
          the military. Approximately $2.6 million of the purchase price was
          paid in cash at closing. The remaining purchase price of $23.6 million
          was paid in cash in November 2002. Approximately $3.9 million of the
          purchase price is being held in escrow for the satisfaction of
          indemnification claims under the terms of the acquisition agreement.
          During the year ended and as of January 31, 2002, WDS had revenue of
          approximately $28.0 million and had approximately 160 employees.


                                       9


               The results of operations for WDS have been included in the
          Company's operations since the acquisition date. The purchase price
          has been allocated to the assets acquired and liabilities assumed
          based on their estimated fair values at the acquisition date.
          Intangible assets related to the WDS acquisition include $16.2 million
          of acquired technology to be amortized over five years, $6.4 million
          of customer relationships to be amortized over seven years and $3.3
          million of goodwill.

               In connection with the acquisition of WDS, we allocated $3.8
          million, or 14.5% of the purchase price to in-process research and
          development projects. There were several in-process research and
          development projects at the time of the WDS acquisition. At the
          acquisition date, WDS was evaluating the efforts required to complete
          acquired in-process research and development projects including
          planning, designing, testing and other activities necessary to
          establish that the product or enhancements to existing products could
          be produced to meet desired functionality and technical performance
          requirements. This was being done in conjunction with the enhancement
          of three software products. The most significant of these projects was
          the completion of the Buying Advantage product, which is an advanced
          internet-based direct procurement solution designed for large
          aerospace and defense companies, mid-sized suppliers and maintenance,
          repair and overhaul facilities in industry and government. It enables
          single-site or multi-site organizations to leverage the supplier
          community as a strategic asset through aggregated sourcing and buying,
          increased buyer efficiencies and through efficient collaboration and
          integration with suppliers. This results in reduced lead-time and cost
          and improved responsiveness. The value assigned to Buying Advantage
          was $3.3 million.

               The value of the purchased in-process research and development
          was computed using discount rates ranging from 26% to 30% on the
          anticipated income stream of the related product revenue using the
          income approach appraisal method. The discounted cash flows were based
          on management's forecast of future revenue, costs of revenue and
          operating expenses related to the products and technologies purchased
          from WDS. The determined value was then adjusted to reflect only the
          value creation efforts of WDS prior to the close of the acquisition.
          At the time of the acquisition, the products and enhancements were at
          various stages of completion, ranging from approximately 5% to 96%
          complete and future costs to complete the projects were anticipated to
          be $2.8 million. Anticipated completion dates ranged from one month to
          15 months. The resulting value of purchased in-process research and
          development was further reduced by the estimated value of core
          technology. A purchased research and development charge of $3.8
          million was recorded in the nine months ended November 30, 2002.

               The estimated revenue for the in-process projects were expected
          to commence in calendar 2002 and 2003 upon project completion and to
          decline over four years as new products and technologies enter the
          market. The discount rate utilized was higher than our
          weighted-average cost of capital due to the inherent uncertainties
          surrounding the successful development of the purchased in-process
          technology, the useful life of such technology, the profitability
          levels of the technology and the uncertainty of technological advances
          that were unknown at the time of the acquisition. The original
          research and development projects are still in the process of being
          completed in accordance with the plans outlined above.

     Digital Freight Exchange, Inc.

               On May 23, 2002, the Company acquired substantially all of the
          assets of DFE for $4.5 million. DFE is a provider of collaborative
          logistics solutions that facilitate online, real-time bids for global
          transportation contracts. Approximately $0.3 million of the purchase
          price was paid in cash at closing. The remaining purchase price of
          $4.2 million was paid in cash in September 2002. Approximately
          $675,000 of the purchase price is being held in escrow for the
          satisfaction of indemnification claims under the terms of the
          acquisition agreement.

8.   Restructuring and Impairment Charges

               Fiscal 2003 Restructuring and Impairment Charges.

               Plan FY03Q2 Restructuring Charges. During the three months ended
          August 31, 2002, the Company announced and implemented a restructuring
          plan designed to better align our cost structure with expected
          revenue. Actions taken included a reduction in the Company's employee
          workforce by approximately 9%, a reduction in the number of
          contractors and the consolidation of some smaller field offices. The
          reduction in workforce was achieved through a combination of attrition
          and involuntary terminations and totaled 123 employees across most
          business functions and geographic regions. All


                                       10


          terminated employees were notified by August 31, 2002. The Company
          recorded a charge for severance and related benefits of approximately
          $2.8 million during the three months ended August 31, 2002. The
          Company also recorded a facility charge of approximately $4.2 million
          during the three months ended August 31, 2002, related to the
          abandonment of leased office space and the consolidation of some
          smaller field offices. These costs include management's best estimates
          of expected sublease income. The Company also recorded a charge of
          approximately $0.3 million during the three months ended August 31,
          2002, related to contract termination costs.

               In accordance with SFAS 144, the Company recorded write-down
          relating to the restructuring of approximately $0.2 million during the
          three months ended August 31, 2002. The write-down consisted of the
          abandonment of certain furniture, fixtures, computer equipment and
          leasehold improvements related to the closure of certain facilities.

               Plan FY03Q2 Impairment Charges. In accordance with SFAS 144, the
          Company recorded an impairment charge of approximately $1.2 million
          during the three months ended August 31, 2002 related to the
          discontinued use of a portion of the Company's sales force automation
          software, which is being replaced with another tool. The remaining net
          book value at August 31, 2002 of $0.7 million is being amortized over
          its remaining useful life of approximately one year.

               The following table sets forth a summary of Plan FY03Q2
          restructuring and impairment charges, payments made against those
          charges and the remaining liabilities as of November 30, 2002 (in
          thousands):



                                                                Adjustments                  Non-cash
                                                                  to Plan                     asset
                                                                  FY03Q2      Utilization    disposal
                                                   Charges in    charges in   of cash in    losses in
                                       Balance     three months  three months six months     six months   Balance as
                                       as of Feb    ended Aug.   ended Nov.    ended Nov.    ended Nov.    of Nov.
             PLAN FY03Q2               28, 2002     31, 2002     30, 2002      30, 2002      30, 2002      30, 2002
                                       --------     --------    ------------  -----------   ------------  ----------
                                                                                          
Lease obligations and terminations      $    --      $ 4,211      $   (32)      $   (60)      $    --       $ 4,119
Severance and related benefits               --        2,818           48        (2,534)           --           332
Impairment charges and write-downs           --        1,449           --            --        (1,449)           --
Other                                        --          290          (44)          (99)         (135)           12
                                        -------      -------      -------       -------       -------       -------
Total                                   $    --      $ 8,768      $   (28)      $(2,693)      $(1,584)      $ 4,463
                                        =======      =======      =======       =======       =======       =======


               Plan FY03Q3 Restructuring Charges. During the three months ended
          November 30, 2002, the Company announced and implemented an additional
          restructuring plan designed to further align our cost structure with
          expected revenue. Actions taken included a reduction in the Company's
          employee workforce by approximately 12%, a reduction in contractors,
          the consolidation of some smaller field offices and lease termination
          costs. The reduction in workforce was achieved through a combination
          of attrition and involuntary terminations and totaled 163 employees,
          144 of which were involuntary, across most business functions and
          geographic regions. All terminated employees were notified by November
          30, 2002 and 20 were still employed on November 30, 2002. The Company
          recorded a charge for severance and related benefits of approximately
          $3.6 million during the three months ended November 30, 2002. The
          Company also recorded a facility charge of approximately $3.3 million
          during the three months ended November 30, 2002, related to the
          abandonment of leased office space and the consolidation of some
          smaller field offices. These costs include management's best estimates
          of expected sublease income. The Company also recorded other charges
          of approximately $0.3 million related to contract termination costs.

               In accordance with SFAS 144, the Company recorded a write down
          relating to the restructuring of approximately $1.0 million during the
          three months ended November 30, 2002. The write-down consisted of the
          abandonment of certain furniture, fixtures, computer equipment and
          leasehold improvements related to the closure of certain facilities.

               The following table sets forth a summary of Plan FY03Q3
          restructuring and impairment charges, payments made against those
          charges and the remaining liabilities as of November 30, 2002 (in
          thousands):


                                       11





                                                                               Non-cash
                                                                                asset
                                                                               disposal
                                                                 Utilization   losses in
                                                    Charges in    of cash in     three
                                       Balance     three months  three months    months      Balance as
                                       as of Feb    ended Nov.     ended Nov.  ended Nov.    of Nov. 30,
         PLAN FY03Q3                   28, 2002      30, 2002      30, 2002     30, 2002        2002
                                       ---------   ------------  ------------  ----------    -----------
                                                                               
Lease obligations and terminations      $    --      $ 3,305      $   (66)      $    --       $ 3,239
Severance and related benefits               --        3,585       (1,323)           --         2,262
Impairment charges and write-downs           --        1,035           --        (1,035)           --
Other                                        --          262           (7)           --           255
                                        -------      -------      -------       -------       -------
Total                                   $    --      $ 8,187      $(1,396)      $(1,035)      $ 5,756
                                        =======      =======      =======       =======       =======


               Fiscal 2002 Restructuring Charges.

               Plan FY02Q2 Restructuring Charges. During June 2001, the Company
          adopted a restructuring plan in order to centralize certain of its
          product development functions in Rockville, MD from two remote
          offices. This resulted in the closure of one office and reduction of
          space occupied in another office, as well as the relocation and
          termination of approximately 10 and 40 employees, respectively. As a
          result, the Company recorded a restructuring charge related to the
          product development consolidation of approximately $2.4 million during
          the three months ended August 31, 2001.

               The following table sets forth a summary of Plan FY02Q2
          restructuring charges, payments made against those charges and the
          remaining liabilities as of November 30, 2002 (in thousands):



                                                  Utilization
                                                  of cash in
                                       Balance    nine months   Balance as
                                      as of Feb    ended Nov.    of Nov.
         PLAN FY02Q2                   28, 2002     30, 2002    30, 2002
                                      ---------   -----------   ----------
                                                       
Lease obligations and terminations      $1,072      $ (278)      $  794
Severance and related benefits              93         (93)          --
Impairment charges and write-downs          --          --           --
Other                                       15         (15)          --
                                        ------      ------       ------
Total                                   $1,180      $ (386)      $  794
                                        ======      ======       ======


               Plan FY02Q3 Restructuring Charges ("Plan FY02Q3"). During October
          2001, the Company announced and implemented an additional
          restructuring plan designed to reduce expenses as a result of expected
          reduction in revenue caused by client concerns about committing to
          large capital projects in the face of weakening global economic
          conditions. We believe that these concerns were heightened further by
          the terrorist attacks in the United States on September 11, 2001
          making it difficult for us to accurately forecast our revenues while
          global economic conditions were uncertain. Actions taken included a
          reduction in the Company's employee workforce and a reduction in the
          amount of office space to be used in certain of the Company's leased
          facilities. Involuntary employee terminations totaled 123 across most
          business functions and geographic regions through November 30, 2001.
          All terminated employees were notified by November 30, 2001. The
          Company recorded a charge for severance and related benefits of
          approximately $1.9 million during the three months ended November 30,
          2001. The Company recorded a facility charge of approximately $2.3
          million during the three months ended November 30, 2001 resulting from
          approximately $0.7 million related to the abandonment of leased office
          space in two offices as well as approximately $1.6 million from the
          expected loss of sublease rental income on office space closed in
          fiscal 1999. These costs include management's best estimates of the
          remaining lease obligations and loss of sublease rental income.

               The following table sets forth a summary of Plan FY02Q3
          restructuring charges, payments made against those charges and the
          remaining liabilities as of November 30, 2002 (in thousands):



                                                Adjustments
                                                 to Plan
                                                   FY02Q3     Utilization
                                                 charges in   of cash in
                                    Balance as  three months  nine months  Balance as
                                     of Feb 28,  ended Aug.   ended Nov.    of Nov.
        PLAN FY02Q3                     2002     31, 2002      30, 2002     30, 2002
                                        ----     --------      --------     --------
                                                               
Lease obligations and terminations      $ 517      $  --        $(195)        $ 322
Severance and related benefits            151         69          (41)          179
Impairment charges and write-downs         --         --           --            --
Other                                      --         --           --            --
                                        -----      -----        -----         -----
Total                                   $ 668      $  69        $(236)        $ 501
                                        =====      =====        =====         =====



                                       12


               Fiscal 1999 Restructuring Charges

               Plan FY99 Restructuring Charges ("Plan FY99"). During the third
          and fourth quarters of fiscal 1999, the Company implemented a
          restructuring plan aimed at reducing costs and returning the Company
          to profitability. Actions taken included a reduction in the Company's
          workforce of 412 employees across all business functions in the United
          States, the abandonment of future lease commitments on office
          facilities that were closed and write-downs of operating assets,
          goodwill and capitalized software made in accordance with SFAS 121.

               The following table sets forth a summary of Plan FY99
          restructuring charges, payments made against those charges and the
          remaining liabilities as of November 30, 2002 (in thousands):



                                                     Utilization
                                                     of cash in
                                         Balance     nine months     Balance as
                                        as of Feb     ended Nov.       of Nov.
           PLAN FY99                     28, 2002     30, 2002        30, 2002
                                         --------     --------        --------
                                                            
Lease obligations and terminations        $3,708        $ (379)        $3,329
Severance and related benefits                --            --             --
Impairment charges and write-downs            --            --             --
Other                                        179           (70)           109
                                          ------        ------         ------
Total                                     $3,887        $ (449)        $3,438
                                          ======        ======         ======



               The following table sets forth a summary of total restructuring
          and impairment charges, payments made against those charges and the
          remaining liabilities as of November 30, 2002 (in thousands):




                                                      Charges and                     Non-cash
                                                      adjustments   Utilization        asset
                                                       to charges     of cash         disposal
                                                        in nine       in nine        losses in
                                          Balance       months         months        nine months       Balance as
                                         as of Feb     ended Nov.     ended Nov.      ended Nov.        of Nov.
           ALL PLANS                     28, 2002       30, 2002      30, 2002         30, 2002        30, 2002
                                         --------       -------       --------         --------        --------
                                                                                            
Lease obligations and terminations        $ 5,297        $ 7,484        $  (978)        $    --         $11,803  (3)
Severance and related benefits                244          6,520         (3,991)             --           2,773
Impairment charges and write-downs             --          2,484             --          (2,484)             --
Other                                         194            508           (191)           (135)            376
                                          -------        -------        -------         -------         -------
Total                                     $ 5,735  (1)   $16,996        $(5,160)        $(2,619)        $14,952  (2)
                                          =======        =======        =======         =======         =======


               (1)  $1.6 million and $4.1 million are included in other accrued
                    current liabilities and other non-current liabilities,
                    respectively, in the consolidated balance sheet as of
                    February 28, 2002.

               (2)  $6.0 million and $9.0 million are included in other accrued
                    current liabilities and other non-current liabilities,
                    respectively, in the consolidated balance sheet as of
                    November 30, 2002.

               (3)  Certain lease obligations extend through fiscal year 2009.

9.   Income Taxes

               Income tax expense of $0.7 million and $21.5 million was recorded
          for the three and nine-month periods ended November 30, 2002,
          respectively. Management regularly evaluates the realizability of its
          deferred tax assets given the nature of its operations and the tax
          jurisdictions in which it operates. Based on various factors including
          cumulative losses for fiscal 2001, 2002 and 2003, when adjusted for
          non-recurring items, the size of our expected loss for fiscal 2003 and
          estimates of future profitability, management has concluded that
          future income will, more likely than not, be insufficient to recover
          its net deferred tax assets. Based on the weight of positive and
          negative evidence regarding recoverability of our deferred tax assets
          ( net operating loss carryforwards), we recorded a valuation allowance
          for the full amount of our net deferred tax assets, which resulted in
          a $20.4 million charge to income tax expense in the nine months ended
          November 30, 2002. Despite the valuation allowance, these deferred tax
          assets and the future tax-deductible benefits related to these
          deferred tax assets will remain available to offset


                                       13


          future taxable income. Management will continue to monitor its
          estimates of future profitability and realizability of its net
          deferred tax assets based on evolving business conditions.


10.  Credit Facility and Restricted Cash

               We have a one-year committed revolving credit facility with Bank
          of America, N.A. ("BOA") for $20.0 million, as amended, that expires
          on February 28, 2003. Under its terms, we may request cash advances,
          letters of credit, or both. We may make borrowings under the facility
          for working capital purposes, acquisitions or otherwise. The facility
          requires us to comply with various operating performance, net worth,
          leverage and liquidity covenants, restricts us from declaring or
          paying cash dividends and limits the amount of cash paid for
          acquisitions. The financial covenants under this facility are as
          follows:

               -    Consolidated EBITDA (as defined in the credit facility, as
                    amended) must be equal to or greater than negative 2.5% of
                    consolidated stockholders' equity for the fiscal quarters
                    ended February 28, 2002 and May 31, 2002, not less than
                    negative $16.0 million for the quarter ended August 31,
                    2002, not less than negative $5.0 million for quarter ending
                    November 30, 2002 and not less than $0 for the quarter ended
                    February 28, 2003;

               -    Cash, cash equivalents and marketable securities
                    ("liquidity") cannot be less than $125 million;

               -    Consolidated stockholders' equity cannot be less than $250
                    million plus 50% of consolidated net income (if greater than
                    $0) plus 100% of increases in stockholders' equity after
                    February 28, 2002 as a result of issuance of common stock;
                    and.

               -    Leverage ratio ((total liabilities (excluding convertible
                    debt) plus outstanding letters of credit) divided by
                    stockholders' equity) cannot exceed 50%.

               As of November 30, 2002, we had $14.1 million in letters of
          credit outstanding under this line to secure our lease obligations for
          office space. We were in compliance with all financial covenants as of
          November 30, 2002 except for the consolidated EBITDA covenant. We are
          in the process of obtaining a waiver for this violation. In event BOA
          does not grant a waiver, they can terminate their commitment to make
          further loans and letter of credit extensions under the credit
          facility. We paid cash in November 2002 for the remaining $23.6
          million of consideration payable for the WDS acquisition. The credit
          facility only allowed us to pay up to $15.0 million in cash per
          acquisition prior to being amended in November 2002 to allow for the
          WDS acquisition payment. Prior to receiving this amendment to the
          credit facility, BOA required the Company to deposit sufficient cash
          to provide collateral for outstanding letters of credit. The Company
          has classified such amounts as restricted cash in the condensed
          consolidated balance sheet as of November 30, 2002.

11.  Supplemental Cash Flow Information.

               The Company paid total interest of $12.7 million and $12.6
          million during the nine months ended November 30, 2002 and 2001,
          respectively.

               Supplemental information of non-cash financing activities is as
          follows:

               We recorded approximately $4.5 million and $0.5 million in
          capital leases during the nine months ended November 30, 2002 and
          2001, respectively.



                                       14


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

          FORWARD LOOKING STATEMENTS:

                    THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH
          OUR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES
          AND OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS REPORT. THE
          DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS AND ARE
          MADE IN RELIANCE UPON SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
          LITIGATION REFORM ACT OF 1995. OUR ACTUAL RESULTS MAY DIFFER
          MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS
          AND OTHER FORWARD-LOOKING STATEMENTS MADE ELSEWHERE IN THIS REPORT AS
          A RESULT OF SPECIFIED FACTORS, INCLUDING THOSE SET FORTH UNDER THE
          CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS."

          Overview:

               We are a leading global provider of supply chain management and
          pricing and revenue optimization solutions. We also provide solutions
          for supplier relationship management, and service & parts management.
          Our solutions help companies lower operating costs, improve customer
          service, increase revenue, enhance profitability and accelerate
          revenue and earnings growth. They do this by creating efficiencies in
          how goods and services are brought to market, how they are sold and
          how they are serviced and maintained. Our Enterprise Profit
          Optimization(TM) solutions, which combine the proven cost-reducing
          power of our solutions with the revenue-enhancing capability of
          pricing and revenue optimization solutions, provide additional
          benefits by providing businesses with the ability to simultaneously
          optimize cost and revenue to enhance profitability on an
          enterprise-wide basis. These solutions integrate pricing, forecasting,
          and operational planning and execution to help companies enhance
          margins across their enterprises and extended trading networks.

               Our supply chain management solutions help companies plan,
          optimize and execute their supply chain processes. These processes
          include manufacturing, distribution and service operations, and
          collaboration with a company's extended trading network of suppliers
          and customers. Our supplier relationship management solutions help
          improve the activities required to design, source, and procure goods
          and to collaborate more effectively with key suppliers of direct
          materials. Our pricing and revenue optimization solutions help
          optimize a company's demand chain, including pricing and promotions to
          all customers through all channels, with the aim of balancing the
          trade-offs between profitability and other strategic objectives such
          as market share. Our service & parts management solutions help
          companies optimize and manage their service and parts operations by
          effectively planning and scheduling maintenance programs, parts,
          materials, tools, manpower and repair facilities to profitably provide
          the highest levels of customer service. We also provide strategic
          consulting, implementation and customer support services to our
          clients as part of our solutions.

               Increasing global competition, shortening product life cycles and
          more demanding customers are forcing businesses to provide improved
          levels of customer service while shortening the time it takes to bring
          their products and services to market. We focus the development of our
          technology on addressing the changing needs of companies in the
          markets we serve, including the need to do business in extended
          trading networks. We offer solutions to companies in many industries
          including apparel; automotive; chemical & energy; communications &
          high technology; consumer packaged goods; food & agriculture; footwear
          & textiles; forest products; government, aerospace & defense;
          industrials; life sciences; retail; third-party logistics;
          transportation; travel, transport & hospitality; and utilities. Our
          customer base of approximately 1,200 clients includes large,
          multinational enterprises


                                       15

          such as 3Com Corporation; AT&T; Amazon.com; BMW; Boeing Co.; BP; Brown
          & Williamson Tobacco Corp.; Caterpillar Mexico S.A. de C.V.; Circuit
          City; Cisco Systems Inc.; Coca-Cola Bottling Co. Consolidated;
          Continental Airlines; DaimlerChrysler; Delta Air Lines; Diageo;
          DuPont; Fairchild Semiconductor; Ford Motor Company; General Electric;
          Harley-Davidson, Inc.; Hormel Foods Corp.; Kraft Foods, Inc.; Levi
          Strauss & Co.; Nestle; RadioShack Corporation; Texas Instruments
          Incorporated; and Unilever Home & Personal Care, USA; as well as
          mid-sized enterprises.

               As a result of deterioration in the markets for our products and
          services due to the progressive weakening of global economic
          conditions during fiscal 2002, the Company faced new challenges in its
          ability to grow revenue, improve operating performance and expand
          market share. The weakening macroeconomic environment included a
          recession in the United States economy that was fueled by substantial
          reductions in capital spending by corporations world-wide, especially
          spending on information technology. Economic conditions deteriorated
          more severely in response to the terrorist attacks in the United
          States on September 11, 2001, subsequent bioterrorism threats and
          resulting political and military actions. During our second and third
          quarters of fiscal 2002, we experienced delays in consummating
          software license transactions, especially during the last few days of
          the quarter ended August 31, 2001. The delays were caused by
          prospects' concerns about committing to large capital projects in the
          face of uncertain global economic conditions. We believe that these
          concerns were heightened further by the terrorist attacks in the
          United States on September 11, 2001 making it difficult for us to
          accurately forecast our revenues while global economic conditions were
          uncertain. Late in our quarter ended November 30, 2001, we began to
          see improvements in closure rates on software license transactions.
          Our closure rates on software license transactions continued to
          improve during our quarter ended February 28, 2002, as evidenced by
          increases in software revenue as compared to our second and third
          quarters of fiscal 2002.

               As we entered into fiscal 2003, global economic conditions and
          information technology spending appeared to be stabilizing. However,
          capital spending by corporations, especially spending on enterprise
          application software, continued to be weak. In addition, we believe
          that market conditions overseas, especially in Europe, tend to lag the
          United States. As enterprise application software spending by United
          States and European corporations further slowed late in our quarter
          ended May 31, 2002 and into our quarters ended August 31, 2002 and
          November 30, 2002, our financial performance was adversely affected.
          The lengthening of sales cycles in recent quarters, especially the
          second and third quarters of fiscal 2002 and fiscal 2003 to date have
          caused our software revenue and total revenue to be much lower than
          the second half of fiscal 2001 and the first quarter of fiscal 2002,
          adversely affecting our operating performance. Demand for our pricing
          and revenue optimization and our supplier relationship management
          products has been more severely impacted than our supply chain
          management and service & parts management products for which there are
          more mature markets. Although our markets in most industries and
          geographies have deteriorated, industries most severely impacted
          include, among others, manufacturing, chemical & energy, high
          technology and travel, transportation & hospitality. Industries less
          affected include automotive, consumer packaged goods, food &
          agriculture, life sciences and retail, as consumer spending,
          especially in the United States, has remained stable. Our clients and
          prospects in these markets have continued to invest in application
          software, including our offerings, although at reduced rates. The
          Company has not lost any major customers or contracts in recent
          quarters that have negatively impacted revenue. The Company has
          experienced a decline in the average selling price ("ASP") per
          software license transaction over the past three-quarters. This is
          attributable to the Company having no software license transactions
          greater than $5.0 million during the nine months ended November 30,
          2002 as compared to four in the comparable prior period and customers
          generally licensing fewer software modules. Currently, it is unclear
          when or if our average selling price per license transaction will
          decrease, stabilize or increase. We believe market conditions will
          continue to be challenging for us in the near-term as longer sales
          cycles and delays in decision making on software purchases may
          persist.

               In response to the weakness in spending on enterprise application
          software, we enacted a number of cost containment and cost reduction
          measures in our second and third quarters of fiscal 2003, in addition
          to those implemented during fiscal 2002, to reduce our cost structure.
          In our second quarter of fiscal 2003, we reduced our employee
          workforce by 9% across the organization, reduced the number of
          contractors, implemented a mandatory unpaid leave program for all U.S.
          employees during the first week in July and a voluntary week of unpaid
          leave during our second quarter of fiscal 2003 for our European
          employees and consolidated some of our smaller field offices. These
          cost containment and cost reduction measures resulted in restructuring
          and impairment charges of approximately $8.8 million in the quarter
          ending August 31, 2002 for severance and


                                       16


          related benefits associated with involuntary terminations, lease
          termination costs, contract termination costs and impairment charges
          on our sales force automation software, property, equipment and
          leasehold improvements.

               In our third quarter of fiscal 2003, we reduced our employee
          workforce by an additional 12% across the organization, further
          reduced the number of contractors, implemented another mandatory
          unpaid leave program for all U.S. employees during the first week in
          September and another voluntary week of unpaid leave during our third
          quarter of fiscal 2003 for our European employees, consolidated some
          of our smaller field offices and further reduced discretionary
          spending. These cost containment and cost reduction measures resulted
          in restructuring and impairment charges of approximately $8.2 million
          in the quarter ending November 30, 2002 for severance and related
          benefits associated with involuntary terminations, lease termination
          costs, and impairment charges on property, equipment and leasehold
          improvements.

               Our implementation of cost containment and cost reduction
          initiatives during our second and third quarters of fiscal 2003 better
          aligned our operating cost structure with the anticipated revenue
          levels due to the downturn in the global economy. This is evidenced by
          the decrease in total expenditures, when adjusted for non-cash items
          and restructuring and impairment charges, as compared to total
          revenue. Total operating expenses, for our third quarter of fiscal
          2003, excluding non-cash items (amortization of developed technology
          and intangibles, non-cash stock compensation expense, purchased
          research and development and impairment charges) and restructuring
          charges, decreased 20.1%, or $18.2 million, from the total for our
          first quarter of fiscal 2003, compared to a decrease in total revenues
          of 16.4%, or $12.2 million, over the same period.

               In the aggregate, we expect that all cost containment and cost
          reduction measures implemented in fiscal 2003 will reduce our cost
          structure by approximately $80 million on an annualized basis.


          Results of Operations:

               The following table includes the condensed consolidated
          statements of operations data for the three and nine months ended
          November 30, 2002 and 2001 expressed as a percentage of revenue:



                                                   Three months ended November 30,  Nine months ended November 30,
                                                          2002           2001           2002           2001
                                                         ------         ------         ------         ------
                                                                                       
REVENUE:
     Software                                              22.6%          31.2%          27.4%          38.8%
     Services                                              40.3%          38.8%          38.5%          34.8%
     Support                                               32.7%          26.8%          29.9%          23.1%
     Reimbursed expenses                                    4.4%           3.2%           4.2%           3.2%
                                                         ------         ------         ------         ------

         Total revenue                                    100.0%         100.0%         100.0%         100.0%
                                                         ------         ------         ------         ------

OPERATING EXPENSES:
     Cost of software                                       7.0%           6.7%           7.5%           6.3%
     Amortization of acquired technology                    5.7%           3.7%           4.9%           2.8%
     Cost of services and support                          38.0%          33.2%          36.2%          30.0%
     Cost of reimbursed expenses                            4.4%           3.2%           4.2%           3.2%
     Sales and marketing                                   33.0%          37.9%          36.7%          38.4%
     Product development                                   22.6%          24.3%          23.3%          22.8%
     General and administrative                            11.3%           9.0%          10.3%           8.9%
     Amortization of intangibles                            1.6%          30.7%           1.4%          26.4%
     Restructuring and impairment charges                  13.1%           5.9%           8.2%           2.8%
     Purchased research and development                      --             --            1.8%            --
     Non-cash stock compensation expense (benefit)          1.2%           1.8%           1.3%          (1.8)%
     IRI settlement                                          --            4.4%            --            1.3%
                                                         ------         ------         ------         ------

         Total operating expenses                         138.0%         160.8%         135.8%         141.1%
                                                         ------         ------         ------         ------

Loss from operations                                      (38.0)%        (60.8%)        (35.8)%        (41.1%)
Other expense, net                                         (2.6)%        (17.3)%         (2.6)%         (5.2)%
                                                         ------         ------         ------         ------

Loss before income taxes                                  (40.6%)        (78.0%)        (38.4%)        (46.4%)
Provision for (benefit from) income taxes                   1.1%         (14.7%)         10.4%          (8.4%)
                                                         ------         ------         ------         ------

Net loss                                                  (41.7)%        (63.3%)        (48.7)%        (38.0%)
                                                         ======         ======         ======         ======



                                       17


               The percentages shown above for cost of services and support,
          sales and marketing, product development and general and
          administrative expenses have been calculated excluding non-cash stock
          compensation expense (benefit) as follows (in thousands):



                                 Three months ended November 30,  Nine months ended November 30,
                                 -------------------------------  ------------------------------
                                       2002            2001            2002             2001
                                     -------         -------         -------          -------
                                                                          
Cost of services and support         $   390         $   535         $ 1,296          $  (390)
Sales and marketing                      209             537             719           (2,166)
Product development                       59             115             244           (1,393)
General and administrative                96             116             418             (211)
                                     -------         -------         -------          -------
                                     $   754         $ 1,303         $ 2,677          $(4,160)
                                     =======         =======         =======          =======


          See "Non-Cash Stock Compensation Expense (Benefit)" for further
          detail.

          USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

               The accompanying discussion and analysis of our financial
          condition and results of operations are based upon our unaudited
          condensed consolidated financial statements, which have been prepared
          in accordance with accounting principles generally accepted in the
          United States. The preparation of these financial statements requires
          that we make estimates and judgments that affect the reported amounts
          of assets, liabilities, revenues and expenses, and related disclosure
          of contingent assets and liabilities. We base our estimates on
          historical experience and on various other assumptions that we believe
          to be reasonable under the circumstances, the results of which form
          the basis for making judgments about the carrying values of assets and
          liabilities that are not readily apparent from other sources. Actual
          results could differ from the estimates made by management with
          respect to these and other items that require management's estimates.

               We have identified the accounting policies that are critical to
          understanding our historical and future performance, as these policies
          affect the reported amounts of revenue and the more significant areas
          involving management's judgments and estimates. These significant
          accounting policies relate to revenue recognition, allowance for
          doubtful accounts, capitalized software, valuation of long-lived
          assets, including intangible assets and impairment review of goodwill,
          deferred income taxes and restructuring-related expenses. These
          policies, and our procedures related to these policies, are described
          in detail below. In addition, please refer to the audited financial
          statements and notes included in the Annual Report on Form 10-K of the
          Company for the fiscal year ended February 28, 2002.


          Revenue Recognition

               Our revenue consists of software revenue, services revenue,
          support revenue and reimbursed expenses. Software revenue is generally
          recognized upon execution of a software license agreement and shipment
          of the software, provided the fees are fixed and determinable and
          collection is considered probable in accordance with the American
          Institute of Certified Public Accountants ("AICPA") Statement of
          Position ("SOP") 97-2, "Software Revenue Recognition," as modified by
          SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition with
          Respect to Certain Transactions ("SOP 98-9")," and Securities and
          Exchange Commission ("SEC") Staff Accounting Bulletin 101 ("SAB 101"),
          "Revenue Recognition." If the Company determines that the arrangement
          fee is not fixed or determinable at the outset of the customer
          arrangement, the Company defers the revenue and recognizes the revenue
          when the arrangement fee becomes due and payable. If the Company
          determines that collectibility is not probable at the outset of the
          customer arrangement, the Company defers the revenue and recognizes
          the revenue when payment is received. If a software license contains
          customer acceptance criteria or a cancellation right, the software
          revenue is recognized upon the earlier of customer acceptance or the
          expiration of the acceptance period or cancellation right. Fees are
          allocated to the various elements of software license agreements using
          the residual method, based on vendor specific objective evidence
          ("VSOE") of fair value of any undelivered elements of the arrangement.
          VSOE of fair value for support services is measured by the renewal
          rate. VSOE of fair value for implementation services is based upon
          separate sales of services at stated hourly rates by level of
          consultant. Under the residual method, the Company defers revenue for
          the fair value of its undelivered


                                       18


          elements based on VSOE of fair value and the remaining portion of the
          arrangement fee is allocated to the delivered elements and recognized
          as revenue when the basic criteria in SOP 97-2 have been met.

               Typically, payments for software licenses are due within twelve
          months from the agreement date. Where software license agreements call
          for payment terms of twelve months or more from the agreement date,
          software revenue is recognized as payments become due and all other
          conditions for revenue recognition have been satisfied. When we
          provide services that are considered essential to the functionality of
          software products sold or if software sold requires significant
          production, modification or customization, we recognize revenue on a
          percentage-of-completion basis in accordance with SOP 81-1,
          "Accounting for Performance of Construction Type and Certain
          Production Type Contracts." In these cases, revenue is recognized
          based on labor hours incurred to date compared to total estimated
          labor hours for the contract.

               Implementation services are separately priced and sold, generally
          available from a number of suppliers and typically are not essential
          to the functionality of our software products. Implementation
          services, which include project management, systems planning, design
          and implementation, customer configurations and training are typically
          billed on an hourly basis (time and materials) and sometimes under
          fixed price contracts. Implementation services billed on an hourly
          basis are recognized as the work is performed. On fixed price
          contracts, services revenue is recognized using the
          percentage-of-completion method of accounting by relating labor hours
          incurred to date to total estimated labor hours.

               Support revenue includes post-contract customer support and the
          rights to unspecific software upgrades and enhancements. Support
          revenue from customer support services are generally billed annually
          with the revenue being deferred and recognized ratably over the
          support period.

               To date, the number of fixed price services engagements and
          services engagements considered to be essential to the functionality
          of our software products (both situations requiring use of the
          percentage-of-completion method) have been insignificant. However, if
          we enter into more of these types of arrangements in the future, our
          reported revenue and operating performance will be subject to
          increased levels of estimates and uncertainties.

               The estimation process inherent in the application of the
          percentage-of-completion method of accounting for revenue is subject
          to judgments and uncertainties and may affect the amounts of software
          and services revenue and related expenses reported in our Condensed
          Consolidated Financial Statements. A number of internal and external
          factors can affect our estimates to complete client engagements
          including skill level and experience of project managers and staff
          assigned to engagements and continuity and attrition level of
          implementation consulting staff. Changes in the estimated stage of
          completion of a particular project could create variability in our
          revenue and results of operations if we are required to increase or
          decrease previously recognized revenue related to a particular project
          or we expect to incur a loss on the project.

          Allowance for Doubtful Accounts

               For each of the three years in the period ended February 28,
          2002, and for the nine months ended November 30, 2002, our provision
          for doubtful accounts has ranged between approximately 1% and 3% of
          total revenue. We initially record the provision for doubtful accounts
          based on our historical experience of write-offs and adjust our
          allowance for doubtful accounts at the end of each reporting period
          based on a detailed assessment of our accounts receivable and related
          credit risks. In estimating the allowance for doubtful accounts,
          management considers the age of the accounts receivable, our
          historical write-off experience, the credit worthiness of the
          customer, the economic conditions of the customer's industry and
          general economic conditions, among other factors. Should any of these
          factors change, the estimates made by management will also change,
          which could affect the level of the Company's future provision for
          doubtful accounts. If the assumptions we used to calculate these
          estimates do not properly reflect future collections, there could be
          an impact on future reported results of operations. Based on our total
          revenue reported for the quarter ended November 30, 2002, our
          provision for doubtful accounts would change by $0.6 million in any
          given quarter for a 1% change in proportion of total revenue. The
          provision for doubtful accounts is included in sales and marketing
          expense (for software license receivables) and cost of services and
          support (for services and support revenue), in the condensed
          consolidated statement of operations.


                                       19

        Capitalized Software Development Costs

                We capitalize the development cost of software, other than
        internal use software, in accordance with Statement of Financial
        Accounting Standards No. 86 ("SFAS 86"), "Accounting for the Costs of
        Computer Software to be Sold, Leased or Otherwise Marketed." Software
        development costs are expensed as incurred until technological
        feasibility has been established, at which time such costs are
        capitalized until the product is available for general release to
        clients. Software development costs are amortized at the greater of the
        amount computed using either: (a) the straight-line method over the
        estimated economic life of the product, commencing with the date the
        product is first available for general release; or (b) the ratio that
        current gross revenue bears to total current and anticipated future
        gross revenue. Generally, an economic life of two years is used to
        amortize capitalized software development costs.

                In future periods, if we determine that technological
        feasibility occurs at a later date, such as coincident with general
        product release to clients, we may not capitalize any software
        development costs, which have ranged between $2.1 million and $3.6
        million per quarter during fiscal 2001 through fiscal 2003. This would
        increase our reported operating expenses in the short-term. The
        estimated economic life of our capitalized software development costs is
        subject to change in future periods based on our experience with the
        length of time our products or enhancements are being or are expected to
        be used. A change in the expected economic life of our capitalized
        software development costs of six months would change our quarterly
        operating expenses by $(0.6) million to $1.0 million.

        Valuation of Long-Lived Assets, Including Intangible Assets and
        Impairment Review of Goodwill

                We assess the impairment of long-lived assets, including
        intangible assets and internally developed software, whenever events or
        changes in circumstances indicate that the carrying value may not be
        fully recoverable. When we determine that the carrying value of such
        assets may not be recoverable, we generally measure any impairment based
        on a projected discounted cash flow method using a discount rate
        determined by management to be commensurate with the risk inherent in
        our current business model. In addition, at each balance sheet due date,
        the Company compares the net realizable value of capitalized software
        development costs to the unamortized capitalized costs. To the extent
        the unamortized capitalized costs exceed the net realizable value, the
        excess amount is written off. Other intangible assets, including
        acquired technology, are amortized over periods ranging from two to
        seven years.

                Evaluating long-lived assets for impairment involves judgments
        as to when an asset may potentially be impaired. We consider there to be
        a risk of impairment if there is a significant decrease in the market
        value of an asset, there is a significant change in the extent or
        intended use of an asset, or generated or forecasted operating or cash
        flow losses indicate continuing losses from an asset used to produce
        revenue.

                As of November 30, 2002 our net book value of long-lived assets,
        consisted of the following (in thousands):


           Property and equipment                              $ 32,616
           Software development costs                            13,416
           Software developed for internal use                    2,653
           Goodwill                                             283,613
           Acquired technology                                   44,724
           Customer relationships                                21,660
                                                                 ------
                                                                398,682
                                                                =======


                The estimated economic useful life of our long-lived and
        intangible assets is subject to change in future periods based upon the
        intended use of the asset or period of time revenues are expected to be
        generated. On March 1, 2002, we adopted SFAS 142 and as a result, we no
        longer amortize goodwill. We performed the initial impairment review of
        our goodwill required by SFAS 142 during the first quarter of fiscal
        2003 and no impairment losses were recognized. During the quarters ended
        August 31, 2002 and November 30, 2002, we experienced adverse changes in
        our stock price resulting from a decline in our financial performance
        and adverse business conditions that have



                                       20


        affected the technology industry, especially application software
        companies. Based on these factors, we performed a test for goodwill
        impairment at August 31, 2002 and November 30, 2002 and determined that
        based upon the implied fair value (which includes factors such as, but
        not limited to, the Company's market capitalization, control premium and
        recent stock price volatility) of the Company as of August 31, 2002 and
        November 30, 2002, there was no impairment of goodwill. We will continue
        to test for impairment on an annual basis, coinciding with our fiscal
        year end, or on an interim basis if circumstances change that would more
        likely than not reduce the fair value of our reporting unit below its
        carrying value. If our stock price remains near or lower than recent
        levels such that the implied fair value of the Company is significantly
        less than stockholders' equity for a sustained period of time, among
        other factors, we may be required to record an impairment loss related
        to goodwill below its carrying amount. We will perform a test for
        goodwill impairment at February 28, 2003, which is our annual date for
        goodwill impairment review. Please refer to Note 2 in the Notes to
        Condensed Consolidated Financial Statements included elsewhere in this
        report for further discussion of SFAS 142 and see "Factors That May
        Affect Future Results - Risks Related to Our Business."

                Determining the implied fair value of goodwill involves
        judgments as to when an impairment may exist, as well as estimates
        used to compute the implied fair value. If the estimates used to
        calculate the implied fair value of goodwill were to change such that
        the fair value dropped below stockholders' equity, this could result in
        an impairment charge for some or all of our goodwill balance.

        Deferred Income Taxes

                We account for income taxes in accordance with Statement of
        Financial Accounting Standards No. 109, "Accounting for Income Taxes."
        We assess the likelihood that our deferred tax assets will be recovered
        from our future taxable income, and to the extent we believe that
        recovery is not likely, we establish a valuation allowance. We consider
        historical taxable income, estimates of future taxable income and
        ongoing prudent and feasible tax planning strategies in assessing the
        amount of the valuation allowance. Adjustments could be required in the
        future if we determine that the amount to be realized is greater or less
        than the valuation allowance we have recorded. During the nine months
        ended November 30, 2002, we did not record a deferred income tax benefit
        to offset our loss before income taxes. Based on various factors,
        including our cumulative losses for fiscal 2001, 2002 and 2003 when
        adjusted for non-recurring items, the size of our expected loss for
        fiscal 2003 and estimates of future profitability, management has
        concluded that future income will, more likely than not, be insufficient
        to recover its net deferred tax assets. Based on the weight of positive
        and negative evidence regarding recoverability of our deferred tax
        assets (net operating loss carryforwards), we recorded a valuation
        allowance for the full amount of our net deferred tax assets, which
        resulted in a $20.4 million charge to income tax expense in the nine
        months ended November 30, 2002. Management will continue to monitor its
        estimates of future profitability and realizability of its net deferred
        tax assets based on evolving business conditions.

        Restructuring-Related Expenses

                The Company's restructuring charges are comprised primarily of:
        (i) severance and associated employee benefits related to the
        involuntary reduction of the Company's workforce; (ii) lease termination
        costs and/or costs associated with permanently vacating its facilities
        ("abandonment"); and (iii) impairment costs related to certain
        long-lived assets and leasehold improvements abandoned. The Company
        accounts for the costs associated with the reduction of the Company's
        workforce in accordance with EITF 94-3. Accordingly, the Company records
        the liability related to involuntary termination costs when the
        following conditions have been met: (i) management with the appropriate
        level of authority approves a termination plan that commits the Company
        to such plan and establishes the benefits the employees will receive
        upon termination; (ii) the benefit arrangement is communicated to the
        employees in sufficient detail to enable the employees to determine the
        termination benefits; (iii) the plan specifically identifies the number
        of employees to be terminated, their locations, and their job
        classifications; and (iv) the period of time to implement the plan does
        not indicate changes to the plan are likely. The termination costs
        recorded by the Company are not associated with nor do they benefit
        continuing activities. The Company accounts for lease termination
        costs in accordance with EITF 94-3. Accordingly, the Company records the
        costs associated with lease termination and/or abandonment when the
        following conditions have been met: (i) management with the appropriate
        level of authority approves a termination plan that commits the Company
        to such plan; (ii) the plan specifically identifies all activities that
        will not be continued, including the method of disposition and location
        of




                                       21



        those activities, and the expected date of completion; (iii) the period
        of time to implement the plan does not indicate changes to the plan are
        likely; and (iv) the leased property has no substantive future use or
        benefit to the Company. The Company records the liability associated
        with lease termination and/or abandonment as the sum of the total
        remaining lease costs and related exit costs, less probable sublease
        income or the expected lease termination fees or penalties. The Company
        accounts for costs related to long-lived assets abandoned in accordance
        with SFAS 144 and, accordingly, charges to expense the net carrying
        value of the long-lived assets when the Company ceases to use the
        assets.

                Inherent in the estimation of the costs related to the Company's
        restructuring efforts are assessments related to the most likely
        expected outcome of the significant actions to accomplish lease
        abandonments. Changing business and real estate market conditions may
        affect the assumptions related to the timing and extent of the Company's
        ability to sublease vacated space. The Company reviews the status of
        restructuring liabilities on a quarterly basis and, if appropriate,
        records changes to its restructuring liabilities based on management's
        most current estimates.

        REVENUE:

                Software Revenue. Software revenue decreased 36.4%, or $8.1
        million, and 38.4%, or $35.3 million for the three and nine months ended
        November 30, 2002, respectively, as compared to the same periods in
        2001. The decrease in software revenue was due to the continued weakness
        of the global economy and related decline in spending for enterprise
        application software, which resulted in a decrease in the ASP for our
        software for the three and nine months ended November 30, 2002 and a
        decrease in the number of significant software transactions consummated
        during the three and nine months ended November 30, 2002.

                The following table summarizes our significant software
        transactions consummated during the three and nine months ended November
        30, 2002 and November 30, 2001:



                                          Three Months Ended              Nine Months Ended
                                             November 30,                   November 30,
                                          2002           2001           2002            2001
                                       ------------    ----------     ----------     -----------
                                                                         
Significant Software Transactions (1)
-------------------------------------
Number of transactions                           22           24             70              81
Average selling price (in thousands)          $ 596        $ 843          $ 754         $ 1,087




        (1)     Significant software transactions are those with a value of
                $100,000 or greater recognized within the fiscal quarter.

        The following table summarizes the number of software transactions of
        $1.0 million or greater:



                                                   Three Months Ended              Nine Months Ended
                                                      November 30,                    November 30,
                                                   2002            2001           2002           2001
                                                ------------     ---------      ----------    -----------
                                                                                   
Software transactions $1.0 million - $2.49
  million                                            3              8              13             17
Software transactions $2.5 million - $4.9
  million                                            0              1               2              4
Software transactions $5.0 million or greater        0              0               0              4
                                                ------------     ---------      ----------    -----------
Total software transactions $1.0 million or
  greater                                            3              9              15             25
                                                ------------     ---------      ----------    -----------



                We believe the reduction in software transactions of $1.0
        million or greater in the three and nine months ended November 30, 2002
        is the result of companies becoming more cautious and deliberate
        regarding commitments to large capital expenditures, especially spending
        for enterprise application software, due to the uncertain global
        economic conditions, as evidenced by:

                -       the decrease in the number of software transactions of
                        $2.5 million or greater in the three and nine months
                        ended November 30, 2002 as compared to the same period
                        in 2001; and

                -       customers licensing fewer software modules in the nine
                        months ended November 30, 2002 as compared to the same
                        period in 2001.



                                       22


                Services Revenue. Services revenue decreased 8.9%, or $2.4
        million, and decreased 3.6%, or $3.0 million during the three and nine
        months ended November 30, 2002, respectively, compared to the same
        periods in 2001. The decrease in services revenue during the three and
        nine months ended November 30, 2002 was the result of the decrease in
        the number of completed software license transactions in fiscal 2002 and
        fiscal 2003, and was offset by the services revenue from WDS. As a
        result of the decline in the number of completed software license
        transactions in fiscal 2002 and fiscal 2003, we believe that services
        revenue in fiscal 2003 will be lower than fiscal 2002. Services revenue
        tends to track software license revenue in prior periods. See "Forward
        Looking Statements" and "Factors That May Affect Future Results."

                Support Revenue. Support revenue increased 7.3%, or $1.4
        million, and 12.7%, or $7.0 million during the three and nine months
        ended November 30, 2002, respectively, compared to the same period in
        2001. The increase in support revenue during the three and nine months
        ended November 30, 2002 was due to the increase in the base of clients
        that have licensed our software products and entered into annual support
        arrangements coupled with renewals of annual support agreements by our
        existing client base and the WDS acquisition. In the past, we have
        experienced high rates of renewed annual support contracts. There can be
        no assurance that this renewal rate will continue. See "Forward Looking
        Statements" and "Factors That May Affect Future Results."

                International Revenue. We market and sell our software and
        services internationally, primarily in Europe, Asia, Canada and Latin
        America. Revenue outside of the United States was 27.8% and 30.5% of
        total revenue, or $17.3 million and $21.6 million, during the three
        months ended November 30, 2002 and 2001, respectively, and 24.5% and
        27.8% of total revenue, or $50.6 million and $65.9 million, during the
        nine months ended November 30, 2002 and 2001, respectively. The decrease
        in this revenue resulted from the progressive weakening of global
        economic conditions, especially in the European economies, which
        resulted in delayed buying decisions by prospects and customers for our
        products.

        OPERATING EXPENSES:

                Cost of Software. Cost of software consists primarily of
        amortization of capitalized software development costs and royalty fees
        associated with third-party software either embedded in our software or
        resold by us. The following table sets forth amortization of capitalized
        software development costs and other costs of software for the three and
        nine months ended November 30, 2002 and 2001 (in thousands):



                                           Three Months Ended               Nine Months Ended
                                              November 30,                    November 31,
                                          2002             2001            2002           2001
                                       ------------     -----------     -----------    -----------
                                                                           
Amortization of capitalized software   $    2,911       $    2,568      $    9,323     $    8,522
  Percentage of software revenue            20.7%            11.6%           16.4%           9.3%
Other costs of software                     1,454            2,182           6,172          6,326
  Percentage of software revenue            10.3%             9.9%           10.9%           6.9%
                                       ------------     -----------     -----------    -----------
Total cost of software                 $    4,365       $    4,750      $   15,495     $   14,848
  Percentage of software revenue            31.0%            21.4%           27.3%          16.1%


                The decrease in cost of software during the three months ended
        November 30, 2002 compared to the same period in 2001 was the result of
        decreased royalty fees due to lower software revenue, offset by higher
        amortization of capitalized software development costs. The increase in
        cost of software during the nine months ended November 30, 2002 was the
        result of increased amortization of capitalized software development
        costs. Amortization of capitalized software development costs does not
        vary with software revenue.

                Amortization of Acquired Technology. In connection with our
        acquisition of WDS in April 2002 and certain previous acquisitions, we
        acquired developed technology that we offer as part of our integrated
        solutions. Acquired technology is amortized over periods ranging from
        four to six years. Including the impact of our fiscal 2003 acquisitions,
        we expect amortization of acquired technology to be approximately $3.6
        million per quarter through our fourth quarter fiscal 2005.

                Cost of Services and Support. Cost of services and support
        primarily includes personnel and third party contractor costs. Cost of
        services and support as a percentage of related revenue was 52.1% and
        50.6% in the three


                                       23



        months ended November 30, 2002 and 2001, respectively, and 52.9% and
        51.8% during the nine months ended November 30, 2002 and 2001,
        respectively. Cost of services and support remained flat during the
        three months ended November 30, 2002, compared to the same period in
        2001, and increased 5.1%, or $3.6 million, during the nine months ended
        November 30, 2002, compared to the same period in 2001. The increase in
        cost of services and support during the nine months ended November 30,
        2002 was attributable to an increase in support royalties paid to third
        parties and the WDS acquisition in April 2002, offset by the
        implementation of our cost containment and cost reduction initiatives.

                Sales and Marketing. Sales and marketing expense consists
        primarily of personnel costs, sales commissions, promotional events such
        as trade shows and technical conferences, advertising and public
        relations programs. Sales and marketing expense decreased 23.4%, or $6.3
        million, and 16.7%, or $15.2 million, during the three and nine months
        ended November 30, 2002, respectively, compared to the same periods in
        2001. The decreases during the three and nine months ended November 30,
        2002 were due to:

                -       an overall decrease in the average number of sales,
                        marketing and business development employees to 208 and
                        230 for the three and nine months ended November 30,
                        2002 compared to 254 and 259 for the same periods in
                        fiscal 2002. This was the result of cost containment and
                        cost reduction measures implemented in the second half
                        of fiscal 2002 and fiscal 2003;

                -       a decrease in sales commissions due to lower software
                        revenue; and

                -       a decrease in promotional spending, travel, advertising
                        and public relations spending resulting from cost
                        containment and cost reduction measures implemented in
                        the second half of fiscal 2002 and fiscal 2003.

                Product Development. Product development costs include expenses
        associated with the development of new software products, enhancements
        of existing products and quality assurance activities and are reported
        net of capitalized software development costs. Such costs are primarily
        from employees and third party contractors. The following table sets
        forth product development costs for the three and nine months ended
        November 30, 2002 and 2001 (in thousands):



                                                   Three Months Ended              Nine Months Ended
                                                      November 30,                    November 30,
                                                   2002           2001            2002           2001
                                                -----------    -----------      ----------    -----------
                                                                                  
Gross product development costs                 $   16,202     $   19,716       $  56,636     $   61,704
  Percentage of total  revenue                       26.0%          27.8%           27.4%          26.0%
Less:  Capitalized software development costs        2,107          2,484           8,328          7,711
  Percentage of total  revenue                        3.4%           3.5%            4.0%           3.3%
                                                -----------    -----------      ----------    -----------
Product development costs, as reported          $   14,095     $   17,232       $  48,308     $   53,993
  Percentage of total  revenue                       22.6%          24.3%           23.3%          22.8%


                Gross product development costs decreased 17.8%, or $3.5
        million, and 8.2%, or $5.1 million, during the three and nine months
        ended November 30, 2002, respectively, compared to the same periods in
        2001. This was due to:

                -       an increase in the proportion of our development work
                        being performed by contractors in India in order to take
                        advantage of cost efficiencies associated with India's
                        lower wage scale;

                -       a decrease in wages during the nine months ended
                        November 30, 2002 due to the mandatory unpaid leave
                        program for all U.S. employees in our second and third
                        quarters of fiscal 2003; and

                -       a decrease in the average number of contractors in the
                        United States resulting from cost containment and cost
                        reduction measures implemented in the second half of
                        fiscal 2002 and in fiscal 2003, respectively.

                This decrease was offset by an increase in gross product
        development costs resulting from the WDS acquisition in April 2002.

                The decrease in capitalized software development costs in the
        three months ended November 30, 2002 was due to the decreases listed
        above. The increase in capitalized product development costs in the nine
        months ended



                                       24



        November 30, 2002 was due to increased costs associated with our latest
        product release completed in May 2002, offset by the decreases listed
        above.

                General and Administrative. General and administrative expenses
        include personnel and other costs of our legal, finance, accounting,
        human resources, facilities and information systems functions. General
        and administrative expenses increased 10.7%, or $0.7 million, and
        increased 0.8%, or $0.2 million, during the three and nine months ended
        November 30, 2002, respectively, compared to the same periods in 2001.
        The changes in the three and nine months ended November 30, 2002 was due
        to an increase in costs resulting from the WDS acquisition in April 2002
        and increases in professional services fees, partially offset by a
        decrease in the average number of general and administrative employees
        resulting from cost containment and cost reduction measures implemented
        in the second half of fiscal 2002 and fiscal 2003.

                Amortization of Intangibles. Our acquisition of WDS in April
        2002 and certain previous acquisitions were accounted for under the
        purchase method of accounting. As a result, we recorded goodwill and
        other intangible assets that represent the excess of the purchase price
        paid over the fair value of the net tangible assets acquired. Other
        intangible assets are amortized over periods ranging from two to seven
        years. Amortization of intangibles decreased by $20.8 million and $59.9
        million during the three and nine months ended November 30, 2002
        compared to the same periods in 2001. This decrease resulted from our
        adoption of SFAS 142 on March 1, 2002, which requires that we no longer
        amortize goodwill and assembled workforce. Details of our amortization
        of intangibles are included in Note 5 in the Notes to our Condensed
        Consolidated Financial Statements included elsewhere in this report.

                Restructuring and Impairment Charges. We adopted restructuring
        plans in the second and third quarters of fiscal 2003 and the second and
        third quarters of fiscal 2002. In connection with our decision to
        implement these plans, we incurred charges of $8.2 million and $17.0
        million in the three and nine months ended November 30, 2002,
        respectively, and $4.2 million and $6.6 million in the three and nine
        months ended November 30, 2001, respectively.

                The following table sets forth a summary of restructuring and
        impairment charges, net of adjustments, for the three and nine months
        ended November 30, 2002 and 2001 (in thousands):




                                                   Three Months Ended              Nine Months Ended
                                                      November 30,                    November 30,
                                                   2002           2001            2002           2001
                                                -----------    -----------      ----------    -----------
                                                                                  
Severance and related benefits                  $    3,633     $    1,893       $   6,520     $    2,318
Lease obligations and terminations                   3,273          2,300           7,484          3,653
Impairment charges                                   1,035             --           2,484            144
Other                                                  218             --             508            497
                                                ----------     ----------       ---------     ----------
Total restructuring and impairment charges      $    8,159     $    4,193       $  16,996     $    6,612
                                                ==========     ==========       =========     ==========



                The impact to reported basic and diluted earnings per share as a
        result of the restructuring and impairment charges was $0.12 and $0.24
        for the three and nine months ended November 30, 2002, respectively, and
        $0.04 and $0.06 for the three and nine months ended November 30, 2001,
        respectively.

                As a result of the adoption of our restructuring plans in fiscal
        2003, we expect our operating expenses to be reduced by approximately
        $80.0 million annually. Details of our restructuring and impairment
        charges are included in Note 8 in the Notes to our Condensed
        Consolidated Financial Statements included elsewhere in this report.

                Purchased Research and Development. Our acquisition of WDS
        included the purchase of technology that has not yet been determined to
        be technologically feasible and has no alternative future use in its
        then-current stage of development. Accordingly, in the nine months ended
        November 30, 2002, $3.8 million of the purchase price for WDS was
        allocated to purchased research and development and expensed immediately
        in accordance with generally accepted accounting principles. Details of
        our acquisitions are included in Note 7 in the Notes to our Condensed
        Consolidated Financial Statements included elsewhere in this report.

                Non-Cash Stock Compensation Expense (Benefit). We recognized
        non-cash stock compensation expense of $0.8 million and $2.7 million
        during the three and nine months ended November 30, 2002 related to
        unvested stock options assumed in the acquisition of Talus Solutions,
        Inc. ("Talus") and $1.3 million and $(4.2) million during the three and
        nine months ended November 30, 2001 related to stock options that were
        repriced in January 1999 and



                                       25



        unvested stock options assumed in the Talus acquisition. These amounts
        are included as a component of stockholders' equity and are amortized by
        charges to operations in accordance with FASB Interpretation No. 44
        ("FIN 44") "Accounting for Certain Transactions Involving Stock
        Compensation."

                Repriced Options:

                In January 1999, the Company repriced certain employee stock
        options, other than those held by executive officers or directors.
        Approximately 3.0 million options were repriced and the four-year
        vesting period started over. Under FIN 44, repriced options are subject
        to variable plan accounting, which requires compensation cost or benefit
        to be recorded each period based on changes in our stock price until the
        repriced options are exercised, forfeited or expire. This resulted in a
        benefit of $0 and $8.0 million during the three and nine months ended
        November 30, 2001, respectively. The initial fair value used to measure
        the ongoing stock compensation charge or benefit was $22.19 based on the
        closing price of our common stock on June 30, 2000. Since our stock
        price at the beginning and end of our first, second and third quarters
        of fiscal 2003 was below $22.19, no charge or benefit was recorded
        during the three and nine months ended November 30, 2002. As of November
        30, 2002, approximately 0.9 million repriced options were still
        outstanding with a remaining vesting period of approximately three
        months. In future periods, we will record additional charges or benefits
        related to the repriced stock options still outstanding based on the
        change in our common stock price compared to the last reporting period.
        If our stock price at the beginning and end of any reporting period is
        below $22.19, no charge or benefit will be recorded.

                Unvested Stock Options - Talus Acquisition:

                As part of the Talus acquisition, we assumed all outstanding
        stock options, which were converted into our stock options. Options to
        purchase approximately 631,000 shares of our common stock were unvested
        at the acquisition date. FIN 44 requires the acquiring company to
        measure the intrinsic value of unvested stock options assumed at the
        acquisition date in a purchase business combination and record a
        compensation charge over the remaining vesting period of those options
        to the extent those options remain outstanding. This resulted in a
        charge of $0.8 million and $2.7 million in the three and nine months
        ended November 30, 2002, respectively, and $1.3 million and $3.7 million
        during the three and nine months ended November 30, 2001, respectively.

                IRI Settlement. In December 2001, the Company and Information
        Resources, Inc. ("IRI") settled a dispute for $8.6 million. We had
        previously recorded a liability of approximately $5.5 million in prior
        years related to this matter. The $3.1 million difference between the
        $5.5 million previously accrued and the total settlement of $8.6 million
        was expensed in the third quarter of fiscal 2002.

        OTHER EXPENSE, NET:

                Other expense, net, includes interest income from cash
        equivalents and marketable securities, interest expense from borrowings,
        foreign currency exchange gains or losses and other gains or losses.
        Other expense was $1.6 million during the three months ended November
        30, 2002 compared to other expense of $12.3 million in the prior year
        period, and was $5.3 million during the nine months ended November 30,
        2002 compared to other expense of $12.4 million in the prior year
        period. This change relates to the Company recording an impairment loss
        of approximately $10.2 million relating to an other-than temporary
        decline in the fair value of its equity investment in Converge, Inc.
        during the three and nine months ended November 30, 2001, as well as
        lower interest income as a result of lower average invested cash and
        marketable securities and lower average interest rates in the three and
        nine months ended November 30, 2002. This was offset by foreign currency
        translation gains in the nine months ended November 30, 2002. Interest
        expense was approximately the same during the comparable periods.

        PROVISION FOR (BENEFIT) FROM INCOME TAXES:

                We recorded income tax expense of $0.7 million and $21.5 million
        during the three and nine months ended November 30, 2002. We did not
        record a deferred income tax benefit during the three and nine months
        ended November 30, 2002 and do not expect to record a deferred income
        tax benefit in future quarters when we incur a loss.



                                       26



                During the nine months ended November 30, 2002, management
        concluded that based on various factors including our cumulative losses
        for fiscal 2001, 2002 and 2003 when adjusted for non-recurring items,
        the size of our expected loss for fiscal 2003 and estimates of future
        profitability, future income will, more likely than not, be insufficient
        to cover its net deferred tax assets. Based on the weight of positive
        and negative evidence regarding recoverability of our deferred tax
        assets (net operating loss carryforwards), we recorded a valuation
        allowance for the full amount of our net deferred tax assets, which
        resulted in a $20.4 million charge to income tax expense in the nine
        months ended November 30, 2002. Management will continue to monitor its
        estimates of future profitability and realizability of its net deferred
        tax assets based on evolving business conditions.

        NET LOSS:

                We reported a net loss of $26.0 million and $45.0 million, and
        $100.8 million and $90.1 million for the three and nine months ending
        November 30, 2002 and 2001, respectively. The increased net loss in the
        nine months ended November 30, 2002 compared to the same period a year
        ago was due to an increased operating loss (excluding non-cash charges
        and restructuring and impairment charges) and income tax charges in the
        fiscal 2003 periods compared to income tax benefits in the fiscal 2002
        periods, offset by the favorable effect of the non-amortization
        provisions of SFAS 142 beginning March 1, 2002. Excluding the impact of
        amortization of acquired technology and intangibles, restructuring and
        impairment charges, purchased research and development charges
        associated with acquisitions, non-cash stock compensation expense
        (benefit), the Converge Investment impairment, the IRI settlement, a
        charge to record valuation allowances against deferred tax assets and
        the related tax effect, we would have reported net losses of $12.5
        million and $7.6 million, and $44.1 million and $16.1 million for the
        three and nine months ended November 30, 2002 and 2001, respectively.
        The change is due to the effects of economic uncertainty and a related
        decline in spending for enterprise application software, as discussed
        above.

        LOSS PER COMMON SHARE:

                Loss per common share is computed in accordance with SFAS No.
        128, "Earnings Per Share," which requires dual presentation of basic and
        diluted earnings per common share for entities with complex capital
        structures. Basic earnings (loss) per common share is based on net
        income divided by the weighted-average number of common shares
        outstanding during the period. Diluted earnings or loss per common share
        include, when dilutive, (i) the effect of stock options and warrants
        granted using the treasury stock method, (ii) the effect of contingently
        issuable shares, and (iii) shares issuable under the conversion feature
        of our convertible notes using the if-converted method. Future
        weighted-average shares outstanding calculations will be affected by
        these, among other, factors:

                -       the on-going issuance of common stock associated with
                        stock option and warrant exercises;

                -       the issuance of common shares associated with our
                        employee stock purchase plan;

                -       any fluctuations in our stock price, which could cause
                        changes in the number of common stock equivalents
                        included in the diluted earnings per common share
                        calculations;

                -       the issuance of common stock to effect business
                        combinations should we enter into such transactions; and

                -       assumed or actual conversions of our convertible debt
                        into common stock.

        LIQUIDITY AND CAPITAL RESOURCES:

                Historically, we have financed our operations and met our
        capital expenditure requirements through cash flows provided from
        operations, long-term borrowings and sales of equity securities. Our
        cash, cash equivalents and marketable securities in the aggregate
        decreased $100.3 million during the nine months ended November 30, 2002
        to $132.8 million. Working capital decreased $110.6 million to $126.4
        million at November 30, 2002. The decrease in cash, cash equivalents and
        marketable securities and working capital resulted from cash payments
        paid for the WDS and DFE acquisitions, two semi-annual interest payments
        on our convertible debt, capital expenditures associated with the move
        to our new corporate headquarters, a cash restriction requirement
        related to our line of credit with BOA (see Note 10 in the Notes to our
        Condensed Consolidated Financial Statements included elsewhere in this
        report), as well as losses from operations. Working capital was also
        negatively impacted by the valuation



                                       27

        allowance recorded for the full amount of our net deferred tax assets,
        including $9.1 million of current deferred tax assets.

                Cash used in operations was $36.9 million and $25.6 million for
        the nine months ended November 30, 2002 and 2001, respectively. The
        $11.3 million change in operating cash flows in the nine months ended
        November 30, 2002 resulted from the increase in the Company's operating
        loss before non-cash items in the nine months ended November 30, 2002.
        Days sales outstanding ("DSO") in accounts receivable, which is
        calculated based on our third quarter revenue, decreased to 92 days as
        of November 30, 2002 versus 100 days as of November 30, 2001.

                Cash (used in) provided by investing activities was $(69.6)
        million and $30.8 million during the nine months ended November 30, 2002
        and 2001, respectively. Investing activities consist of the sales and
        purchases of marketable securities, cash used as collateral for
        outstanding letters of credit which are classified as restricted cash on
        the condensed consolidated balance sheet as of November 30, 2002,
        purchases of property and equipment, purchases and capitalization of
        software and acquisitions and investments in businesses. Total purchases
        of property, equipment and software, including capitalization of
        software, were $22.4 million during the nine months ended November 30,
        2002, an increase of $3.4 million over the comparable period in 2001.
        This increase was due to the completion of the buildout of our new
        corporate headquarters space during fiscal 2003. Acquisitions and
        investments in businesses, net of cash acquired, of $32.1 million during
        the nine months ended November 30, 2002 relate to the WDS and DFE
        acquisitions. Acquisitions and investments in businesses, net of cash
        acquired, of $40.8 million during the nine months ended November 30,
        2001 relate to the acquisitions of Partminer Inc.'s CSD business and
        certain assets of SpaceWorks, Inc. and an investment in Converge, Inc.
        Purchases of marketable securities, net of sales, was $1.1 million
        during the nine months ended November 30, 2002 compared to net sales of
        $90.3 million during the nine months ended November 30, 2001.

                Cash provided by financing activities was $4.8 million and $8.3
        million during the nine months ended November 30, 2002 and 2001,
        respectively. Cash provided by financing activities in the nine months
        ended November 30, 2002 consisted of borrowings on our equipment line of
        credit and proceeds from the exercise of stock options and employee
        stock plan purchases. Cash provided by financing activities in the nine
        months ended November 30, 2001 consisted of proceeds from the exercise
        of stock options and employee stock plan purchases.

                As of November 30, 2002, we had $250.0 million in 5% convertible
        subordinated notes outstanding (the "Notes"). The Notes bear interest at
        5.0% per annum, which is payable semi-annually. The fair market value of
        the Notes in the hands of the holders was $128.4 million and $176.9
        million as of November 30, 2002 and February 28, 2002, respectively,
        based on market quotes. The Notes mature in November 2007 and are
        convertible by the holder into approximately 5.7 million shares of our
        common stock at a conversion price of $44.06 per share, subject to
        adjustment under certain conditions. The conversion price of the Notes
        will be adjusted in the event that we issue our common stock as a
        dividend or distribution with respect to our common stock, we subdivide,
        combine or reclassify our common stock, we issue rights to our common
        stockholders to purchase our common stock at less than market price, we
        make certain distributions of securities, cash or other property to our
        common stockholders(other than ordinary cash dividends), or we make
        certain repurchases of our common stock. The Notes do not have any
        financial covenants. On or after November 7, 2003, we may redeem the
        Notes in whole, or from time to time, in part, at our option. Redemption
        can be made on at least 30 days' notice if the trading price of our
        common stock for 20 trading days in a period of 30 consecutive days
        ending on the day prior to the mailing of notice of redemption exceeds
        120% of the conversion price of the Notes. The redemption
        price,expressed as a percentage of the principal amount, is:



             Redemption Period                  Redemption Price
             -----------------                  ----------------
                                                 
November 7, 2003 through October 31, 2004             103%
November 1, 2004 through October 31, 2005             102%
November 1, 2005 through October 31, 2006             101%
November 1, 2006 through maturity                     100%



                We have a one-year committed revolving credit facility with a
        BOA for $20.0 million, as amended, that expires on February 28, 2003.
        Under its terms, we may request cash advances, letters of credit, or
        both. We may make borrowings under the facility for working capital
        purposes, acquisitions or otherwise. The facility requires us to comply
        with various operating performance, minimum net worth, leverage and
        liquidity covenants, restricts us from declaring or paying cash
        dividends and limits the amount of cash paid for acquisitions. The
        financial covenants under this facility are as follows:

                -       Consolidated EBITDA (as defined in the credit facility,
                        as amended) must be equal to or greater than negative
                        2.5% of consolidated stockholders' equity for the fiscal
                        quarters ended February 28, 2002 and


                                       28


                        May 31, 2002, not less than negative $16.0 million for
                        the quarter ended August 31, 2002 and not be less than
                        negative $5.0 million for quarter ending after November
                        30, 2002 and not less than $0 for the quarter ended
                        February 28, 2003;

                -       Cash, cash equivalents and marketable securities
                        ("liquidity") cannot be less than $125 million;

                -       Consolidated stockholders' equity cannot be less than
                        $250 million plus 50% of consolidated net income (if
                        greater than $0) plus 100% of increases in stockholders'
                        equity after February 28, 2002 as a result of issuance
                        of common stock; and

                -       Leverage ratio ((total liabilities (excluding
                        convertible debt) plus outstanding letters of credit)
                        divided by stockholders' equity) cannot exceed 50%.

                As of November 30, 2002, we had $14.1 million in letters of
        credit outstanding under this line to secure our lease obligations for
        office space. We were in compliance with all financial covenants as of
        November 30, 2002 except for the consolidated EBITDA covenant. We are in
        the process of obtaining a waiver for this violation. In event BOA
        does not grant a waiver, they can terminate their commitment to make
        further loans and letter of credit extensions under the credit facility.
        We paid cash in November 2002 for the remaining $23.6 million of
        consideration payable for the WDS acquisition. The credit facility only
        allowed us to pay up to $15.0 million in cash per acquisition prior to
        being amended in November 2002 to allow for the WDS acquisition payment.
        Prior to receiving this amendment to the credit facility, BOA required
        the Company to deposit sufficient cash to provide collateral for
        outstanding letters of credit. The Company has classified such amounts
        as restricted cash in the condensed consolidated balance sheet as of
        November 30, 2002.

                In April 2002, the Company entered into a credit agreement with
        Silicon Valley Bank, as amended, under which the Company could borrow up
        to $5.0 million for the purchase of equipment. Amounts borrowed under
        the facility accrue interest at a rate equal to the greater of the three
        year treasury note rate plus 5% or 8.25%, and are repaid monthly over a
        36 month period. During the nine months ended November 30, 2002, the
        Company borrowed $2.3 million under this credit facility. The facility
        allowed for borrowings through December 31, 2002. We were in compliance
        with all financial covenants as of November 30, 2002. The Company's
        currently negotiating an unsecured credit facility with another
        commercial lender to replace our credit facility with BOA. The Company
        expects this credit facility to close no later than January 17, 2003 and
        to eliminate the cash restriction under the BOA credit facility by
        February 28, 2003.

                The following summarizes our lease obligations and the effect
        these obligations are expected to have on our liquidity and cash flows
        in future periods (in thousands):



                                                                  FISCAL YEAR ENDED FEBRUARY 28 OR 29,
                                                                  ------------------------------------
                                                 2003      2004     2005      2006      2007     THEREAFTER    TOTAL
                                                 ----      ----     ----      ----      ----     ----------    -----
                                                                                         
       Capital leases                          $  2,721  $  2,716  $ 1,314   $ 1,310   $    546    $     --    $  8,607
       Operating leases                          21,018    20,161   16,978    15,737     15,055      46,881     135,830
                                                 ------    ------   ------    ------     ------      ------     -------
          Total lease obligations              $ 23,739  $ 22,877  $18,292   $17,047   $ 15,601    $ 46,881    $144,437
                                               ========  ========  =======   =======   ========    ========    ========


                On January 16, 2001, we acquired STG Holdings, Inc. ("STG"). We
        may be required to make additional contingent payments to the former
        stockholders of STG of up to $27.9 million during fiscal 2003 if certain
        revenue-based performance criteria were met during the 21-month period
        ending October 31, 2002. Additional contingent payments, if any, would
        be payable in cash, or in limited circumstances, in common stock at our
        election. We are in the process of finalizing the calculations related
        to the contingent consideration. Management believes that additional
        contingent payments to the former stockholders of STG are not likely.
        See "Forward Looking Statements" and "Factors That May Affect Future
        Results."


                                       29



                In the future, we may pursue acquisitions of complementary
        businesses and technologies. In addition, we may make strategic
        investments in businesses and enter into joint ventures that complement
        our existing business. Any future acquisition or investment may result
        in a decrease in our liquidity and working capital to the extent we pay
        with cash.

                We believe that our existing liquidity and expected cash flows
        from operations will satisfy our capital requirements for the
        foreseeable future. We believe that the combination of cash and cash
        equivalents, marketable securities, and anticipated cash flows from
        operations will be sufficient to fund expected capital expenditures,
        capital lease obligations and working capital needs for the next twelve
        months. However, weakening economic conditions or continued weak demand
        for enterprise application software in future periods could have a
        material adverse impact on our future operating results and liquidity.
        Although we have no current plans to do so, we may elect to obtain
        additional equity financing if we are able to raise it on terms
        favorable to us. See "Forward Looking Statements" and "Factors That May
        Affect Future Results."

        FACTORS THAT MAY AFFECT FUTURE RESULTS:

                In addition to the other information in this Form 10-Q, the
        following factors should be considered in evaluating us and our
        business. The risks and uncertainties described below are not the only
        ones facing us. Additional risks and uncertainties that we do not
        presently know or that we currently deem immaterial, may also impair our
        business, results of operations and financial condition.

            RISKS RELATED TO OUR INDEBTEDNESS AND FINANCIAL CONDITION

        OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

                In November 2000, we completed a convertible debt offering of
        $250.0 million in 5% subordinated convertible notes (the "Notes") that
        are due November 2007. Our indebtedness could have important
        consequences for investors. For example, it could:

                -       increase our vulnerability to general adverse economic
                        and industry conditions;

                -       limit our ability to obtain additional financing;

                -       require the dedication of a substantial portion of our
                        cash flows from operations to the payment of principal
                        of, and interest on, our indebtedness, thereby reducing
                        the availability of capital to fund our operations,
                        working capital, capital expenditures, acquisitions and
                        other general corporate purposes;

                -       limit our flexibility in planning for, or reacting to,
                        changes in our business and the industry; and

                -       place us at a competitive disadvantage relative to our
                        competitors with less debt.

                Although we have no present plans to do so, we may incur
        substantial additional debt in the future. While the terms of our credit
        facility imposes certain limits on our ability to incur additional debt,
        we are permitted to incur additional debt subject to compliance with the
        terms and conditions set forth in the loan agreement. Moreover, the
        terms of the Notes set forth no limits on our ability to incur
        additional debt. If a significant amount of new debt is added to our
        current levels, the related risks described above could intensify.

        WE MAY HAVE INSUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE OBLIGATIONS.

                We will be required to generate cash sufficient to pay all
        amounts due on the Notes and to conduct our business operations. The
        Notes require interest payments of $12.5 million annually with $250.0
        million of principal due November 2007. As of November 30, 2002, the
        remaining principal and interest payments due under the Notes was $312.5
        million. Our cash, cash equivalents and marketable securities were
        $132.8 million as of November 30, 2002. We will have to generate $179.7
        million of net cash flow through any combination of normal operations of
        the



                                       30



        Company, raising of debt and equity capital or asset sales by November
        2007 to meet our remaining principal and interest payments under the
        Notes. We have net losses, and we may not be able to cover our
        anticipated debt service obligations. This may materially hinder our
        ability to make principal and interest payments on the Notes. Our
        ability to meet our future debt service obligations will be dependent
        upon our future performance, which will be subject to financial,
        business and other factors affecting our operations, many of which are
        beyond our control.

        WE MAY CHOOSE TO PURCHASE A PORTION OF OUR CONVERTIBLE SUBORDINATED
        NOTES IN THE OPEN MARKET OR AUTHORIZE A STOCK REPURCHASE PROGRAM WHICH
        COULD ADVERSELY EFFECT OUR FINANCIAL CONDITION.

                Although we have no present plans to do so, we may choose to
        purchase a portion of our convertible subordinated notes outstanding
        from time to time in the open market in future periods. We may also
        authorize a stock repurchase program where we would buy back shares of
        our common stock from time to time at prevailing market prices, through
        open market or unsolicited negotiated transactions, depending upon
        market conditions. Either of these actions would be contingent on
        approval of our Board of Directors and on compliance with the conditions
        of applicable securities laws. While the terms of our revolving credit
        facility imposes certain limits on our ability to repurchase our debt
        and equity securities, we are permitted to do so subject to compliance
        with the terms and conditions set forth in the loan agreement. Purchases
        of convertible subordinated notes or stock repurchases in the open
        market would be funded from available cash and cash equivalents and
        could have a materially adverse effect on our liquidity and financial
        condition.

        WE MAY VIOLATE FINANCIAL COVENANTS UNDER OUR CREDIT FACILITY WHICH COULD
        ADVERSELY AFFECT OUR FINANCIAL CONDITION.

                During fiscal 2003, our financial performance has made it
        difficult for us to achieve the financial covenants under our credit
        facility with BOA. During November 2002, we were required to cash
        collateralize $14.1 million of outstanding letters of credit under the
        BOA credit facility as a result of violating a financial covenant. Also,
        we violated the consolidated EBITDA covenant under the BOA credit
        facility for the quarter ended November 30, 2002.

                We expect to enter into a new unsecured credit facility with
        another commercial lender no later than January 17, 2003 to replace the
        BOA credit facility, which should eliminate the cash restriction
        described above. However, if our future financial performance results
        in a violation of financial covenants in future periods, we could be
        required to provide cash collateral for outstanding borrowings or
        letters of credit, which would adversely impact our liquidity and
        financial condition.


                          RISKS RELATED TO OUR BUSINESS

        ADVERSE ECONOMIC AND POLITICAL CONDITIONS HAVE CAUSED A DETERIORATION OF
        THE MARKETS FOR OUR PRODUCTS AND SERVICES WHICH HAS NEGATIVELY AFFECTED
        AND COULD FURTHER NEGATIVELY AFFECT OUR FINANCIAL PERFORMANCE.

                Our revenue and operating results depend on the overall demand
        for our software and related services. Regional and global adverse
        changes in the economy and political unrest have caused a deterioration
        of the markets for our products and services. This has resulted in
        reductions, delays and postponements of customer purchases, which
        materially adversely affected our financial results performance during
        the quarters ended August 31, 2001, November 30, 2001, May 31, 2002,
        August 31, 2002 and November 30, 2002. Demand for our pricing and
        revenue optimization and our supplier relationship management products
        has been more severely impacted than our supply chain management and
        service & parts management products for which there are more mature
        markets. Although our markets in most industries and geographies have
        deteriorated, industries most severely impacted include, among others,
        chemicals and energy, high technology, manufacturing and travel,
        transportation & hospitality. Industries less affected include
        automotive, consumer packaged goods, food & agriculture, life sciences
        and retail. If these adverse conditions continue or worsen, we would
        likely experience further reductions, delays, and postponements of



                                       31


        customer purchases further negatively impacting our financial
        performance.

                National and global responses to future terrorist attacks or
        similar developments, including military actions or war, would likely
        materially adversely affect demand for our software and services because
        of the economic and political effects on our markets and by interrupting
        the ability of our customers to do business in the ordinary course, as a
        result of a variety of factors, including, among others, changes or
        disruptions in movement and sourcing of materials, goods and components
        or the possible interruption in the flow of information or monies.


        WE HAVE EXPERIENCED SIGNIFICANT LOSSES IN RECENT YEARS DUE TO
        OPERATIONAL DIFFICULTIES IN FISCAL 1999 AND THE FIRST HALF OF FISCAL
        2000 AND TO A DETERIORATION OF OUR MARKETS RESULTING FROM WEAKENING
        ECONOMIC CONDITIONS COMMENCING IN FISCAL 2002.

                We have recently incurred significant losses. We experienced
        operational difficulties in fiscal 1999 and the first half of fiscal
        2000. Problems with our direct sales operation and intense competition,
        among other factors, contributed to net losses in fiscal 1999 and fiscal
        2000 and a decline in revenue in fiscal 2000. Thereafter, our financial
        performance began to improve under our new management team. However,
        beginning late in our second quarter of fiscal 2002, weakening economic
        conditions resulted in a deterioration in our markets. We experienced
        sequential declines in software and total revenue during our second and
        third quarters of fiscal 2002. Further weakening of economic conditions,
        which severely impacted the timing of capital spending decisions for
        computer software, particularly enterprise application software, further
        negatively impacted the markets for our products and services. This
        again resulted in significant sequential quarterly declines in software
        and total revenue in our first three-quarters of fiscal 2003. The losses
        incurred during these periods were $96.1 million in fiscal 1999, $8.9
        million in fiscal 2000, $28.1 million in fiscal 2001, $115.2 million in
        fiscal 2002, and $100.8 million in the nine months ended November 30,
        2002. Our ability to improve our financial performance will depend on a
        stabilization or improvement of economic conditions resulting in
        increased demand for our solutions or our ability to align our cost
        structure with revenue without retarding our ability to grow revenue in
        future periods. If market conditions for our solutions do not improve or
        if we do not successfully align our cost structure with our revenue
        without retarding our ability to grow revenue, our business could be
        harmed, and we could continue to incur significant losses. .

        IF OUR STOCK PRICE REMAINS NEAR OR LOWER THAN RECENT LEVELS FOR A
        SUSTAINED PERIOD OF TIME, WE MAY BE REQUIRED TO RECORD SIGNIFICANT
        NON-CASH CHARGES ASSOCIATED WITH GOODWILL IMPAIRMENT.

                On March 1, 2002, we adopted SFAS 142, which changed the
        accounting for goodwill from an amortization method to an
        impairment-only method. Effective March 1, 2002, the Company stopped
        amortizing goodwill but will continue amortizing other intangible assets
        with finite lives. As required by the provisions of SFAS 142, we
        performed the initial goodwill impairment test required during our first
        quarter of fiscal 2003. We consider ourselves to have a single reporting
        unit. Accordingly, all of our $283.6 million in goodwill as of November
        30, 2002 is associated with our entire Company. As of March 1, 2002,
        based upon the Company's implied fair value, there was no impairment of
        goodwill recorded upon implementation of SFAS 142.

                During the quarters ended August 31, 2002 and November 30, 2002,
        we experienced adverse changes in our stock price resulting from a
        decline in our financial performance and adverse business conditions
        that have affected the technology industry, especially application
        software companies. Based on these factors, we performed a test for
        goodwill impairment at August 31, 2002 and November 30, 2002 and
        determined that based upon the implied fair value (which includes
        factors such as, but not limited to, the Company's market
        capitalization, control premium and recent stock price volatility) of
        the Company as of August 31, 2002 and November 30, 2002, there was no
        impairment of goodwill. We will continue to test for impairment on an
        annual basis, coinciding with our fiscal year end, or on an interim
        basis if circumstances change that would more likely than not reduce the
        fair value of our reporting unit below its carrying value. If our stock
        price remains near or lower than recent levels such that the implied
        fair value of the Company is significantly less than stockholders'
        equity for a sustained period of time, among other factors, we may be
        required to record an impairment loss related to goodwill below its
        carrying




                                       32




        amount. We will perform a test for goodwill impairment at February 28,
        2003, which is our annual date for goodwill impairment review.


        OUR FUTURE RESULTS WILL BE ADVERSELY AFFECTED BY SEVERAL TYPES OF
        SIGNIFICANT NON-CASH CHARGES WHICH COULD IMPAIR OUR ABILITY TO ACHIEVE
        OR MAINTAIN PROFITABILITY IN THE FUTURE.

                We will incur significant non-cash charges in the future related
        to the amortization of intangible assets, including acquired technology
        relating to the Western Data Systems of Nevada, Inc. ("WDS"), Digital
        Freight Exchange, Inc. ("DFE"), STG Holdings, Inc. ("STG"), PartMiner
        Inc.'s CSD business, SpaceWorks, Inc. and Talus acquisitions and
        non-cash stock compensation expenses associated with our acquisition of
        Talus. In addition, we have incurred and may in the future incur
        non-cash stock compensation charges related to our stock option
        repricing. During fiscal 2002, we announced that we were required to
        write off our investment in Converge, Inc., which resulted in a pre-tax
        charge of $10.2 million. In the three months ended August 31, 2002, we
        recorded a valuation allowance for the full amount of our net deferred
        tax assets which resulted in a $20.4 million non-cash charge to income
        tax expense. We may also incur non-cash charges in future periods
        related to impairments of long-lived assets. To achieve profitability we
        must grow our revenue sufficiently to cover these charges. Our failure
        to achieve profitability could cause our stock price to decline.


                OUR OPERATING PERFORMANCE HAS BEEN NEGATIVELY IMPACTED BY THE
        PROGRESSIVE WEAKENING OF GLOBAL ECONOMIC CONDITIONS WHICH RESULTED IN A
        DETERIORATION OF OUR MARKETS. IN FISCAL 2002 AND IN THE NINE MONTHS
        ENDED NOVEMBER 30, 2002, WE HAVE RECORDED CERTAIN RESTRUCTURING CHARGES
        AND HAVE ENACTED COST CONTAINMENT AND COST REDUCTION MEASURES IN
        RESPONSE TO THE DOWNTURN IN OUR MARKETS. IF OUR RESTRUCTURING PLANS AND
        OUR COST CONTAINMENT AND COST REDUCTION MEASURES FAIL TO ACHIEVE THE
        DESIRED RESULTS OR RESULT IN UNANTICIPATED NEGATIVE CONSEQUENCES, OR IF
        OUR MARKETS CONTINUE TO EXPERIENCE WEAKNESS, WE MAY SUFFER MATERIAL HARM
        TO OUR BUSINESS.

                Because of the downturn in our markets as a result of
        progressive weakening of global economic conditions during fiscal 2002
        and in the first three-quarters of fiscal 2003, we faced new challenges
        in our ability to grow revenue, improve operating performance and expand
        market share. In response to the impact on our financial performance, we
        implemented restructuring plans and cost containment and cost reduction
        measures to reduce our cost structure, which included, among other
        things, workforce reductions and mandatory unpaid leave programs. In our
        fiscal year 2002 and in our second and third quarters of fiscal 2003, we
        recorded restructuring and impairment charges of $6.6 million, $8.8
        million and $8.2 million, respectively. Although we have no present
        plans to do so, we may initiate further restructuring plans in future
        periods requiring restructuring and impairment charges. If we fail to
        achieve the desired results of our restructuring plans and our cost
        containment and cost reduction measures or if our markets continue to
        experience weakness, we may suffer material harm to our business.

                WE HAVE REDUCED OUR WORKFORCE AS PART OF OUR RECENT COST
        CONTAINMENT AND COST REDUCTION INITIATIVES. IF WE FAIL TO FIELD AND
        RETAIN A QUALIFIED WORKFORCE OUR BUSINESS COULD BE MATERIALLY ADVERSELY
        AFFECTED.

                We believe that our success depends on our ability to motivate
        and retain highly skilled technical, managerial, sales, marketing and
        services personnel. Competition for skilled personnel can be intense,
        and there can be no assurance that we will be successful in attracting,
        motivating and retaining the personnel required to improve our financial
        performance and grow. In addition, the cost of hiring and retaining
        skilled employees is high. Failure to attract and retain highly skilled
        personnel could materially and adversely affect our business.

                Our recent cost containment and cost reduction initiatives may
        yield unintended consequences, such as attrition beyond our planned
        reduction in workforce, reduced employee morale and decreased
        productivity. In addition, the recent trading levels of our stock have
        decreased the value of our stock options granted to employees under our


                                       33



        stock option plans. As a result of these factors, our remaining
        personnel may seek alternate employment, such as with larger, more
        established companies or companies that they perceive as having less
        volatile stock prices or better prospects. Continuity of personnel is a
        very important factor in sales and implementation of our software and
        our product development efforts. Attrition beyond our planned reduction
        in workforce could have a material adverse effect on our financial
        performance.

        OUR PRESIDENT, EXECUTIVE VICE PRESIDENT OF PRICING AND REVENUE
        MANAGEMENT AND PRESIDENT OF EUROPEAN OPERATIONS HAVE RESIGNED IN FISCAL
        2003. THE SUCCESS AND GROWTH OF OUR BUSINESS MAY SUFFER IF WE LOSE
        ADDITIONAL KEY PERSONNEL.

                Our success depends significantly on the continued service of
        our executive officers. Three of our executive officers have recently
        left the Company. Gregory Cudahy, former Executive Vice President of
        Pricing and Revenue Management resigned in May 2002. Richard Bergmann,
        our former President, who had been on a personal leave of absence since
        June 2002, resigned effective October 15, 2002. Terrence A. Austin, our
        former Executive Vice President of European Operations, resigned
        effective January 6, 2003. Andrew Hogenson, who has been with the
        Company since 1997, most recently as our Senior Vice President of
        Product Development, has replaced Gregory Cudahy. Gregory Owens,
        Chairman and Chief Executive Officer, has assumed certain of Richard
        Bergmann's duties. Jean-Claude Walravens, who has been with the Company
        since 1999, most recently as our Vice President Sales, Southern Europe,
        has replaced Mr. Austin as our Senior Vice President and President of
        European Operations. We do not have fixed-term employment agreements
        with any of our executive officers, and we do not maintain key person
        life insurance on our executive officers. The loss of services of any of
        our executive officers for any reason could have a material adverse
        effect on our business, operating results, financial condition and cash
        flows.


        WE HAVE REDUCED OUR SALES FORCE AS PART OF OUR RECENT COST CONTAINMENT
        AND COST REDUCTION INITIATIVES. IF WE FAIL TO FIELD AN EFFECTIVE SALES
        ORGANIZATION, OUR ABILITY TO GROW WILL BE LIMITED, WHICH COULD ADVERSELY
        AFFECT OUR FINANCIAL PERFORMANCE.

                We have reduced our sales force in fiscal 2002 and fiscal 2003
        as a result of the deterioration in our markets.. Decreasing software
        revenues and mandatory leave programs have resulted in reduced
        compensation earned by members of our sales force, which may result in
        further voluntary attrition of our sales force over time. In order to
        grow our revenue, our existing sales force will have to be more
        productive, and we will likely expand our sales force when the markets
        for our products and solutions improve. Our past efforts to expand our
        sales organization have required significant resources. New sales
        personnel require training and may take a long time to achieve full
        productivity. There is no assurance that we will successfully attract
        and retain qualified sales people at levels sufficient to support
        growth. Any failure to adequately sell our products could limit our
        growth and adversely affect our financial performance.


        THE SALES CYCLES FOR OUR PRODUCTS AND SERVICES CAN BE LONG AND
        UNPREDICTABLE. VARIATIONS IN THE TIME IT TAKES US TO LICENSE OUR
        SOFTWARE MAY CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS.

                The time it takes to license our software to prospective clients
        varies substantially, but typically has ranged historically between
        three and twelve months. Variations in the length of our sales cycles
        could cause our revenue to fluctuate widely from period to period.
        Because we typically recognize a substantial portion of our software
        revenue in the last month of a quarter, any delay in the licensing of
        our products could cause significant variations in our revenue from
        quarter to quarter. These delays have occurred on a number of occasions
        in the past and materially adversely affected our financial performance,
        including, most recently, in our quarters ended August 31, 2001,
        November 30, 2001, May 31, 2002, August 31, 2002 and November 30, 2002.
        Furthermore, these fluctuations could cause our operating results to
        suffer in some future periods because our operating expenses are
        relatively fixed over the short term, and we devote significant time and
        resources to prospective clients. The length of our sales cycle depends
        on a number of factors, including the following:



                                       34


                -       the complexities of client challenges our solutions
                        address;

                -       the size, timing and complexity of contractual terms of
                        licenses and sales of our products and services;

                -       wide variations in contractual terms, which may result
                        in deferred recognition of revenue;

                -       customer financial constraints and credit-worthiness;

                -       the breadth of the solution required by the client,
                        including the technical, organizational and geographic
                        scope of the license;

                -       the evaluation and approval processes employed by the
                        clients and prospects, which recently become more
                        complex and lengthy;

                -       economic, political and market conditions; and

                -       any other delays arising from factors beyond our
                        control.

        CHANGES IN THE SIZE OF OUR SOFTWARE TRANSACTIONS MAY CAUSE MATERIAL
        FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS.

                The size of our software transactions fluctuates. Fluctuations
        in the size of our software transactions have occurred, and may in the
        future occur, as a result of changes in demand for our products and
        services. Losses of, or delays in concluding, larger software
        transactions have had and could have a proportionately greater effect on
        our revenue and financial performance for a particular period. For
        example, we recorded no software transaction of $5.0 or greater in
        fiscal 2000, three software transactions of $5.0 million or greater in
        fiscal 2001, six software transactions of $5.0 million or greater in
        fiscal 2002, and no software transactions of $5.0 million or greater in
        the nine months ended November 30, 2002. During this same time period,
        we recorded 14 software transactions of $1.0 or greater in fiscal 2000,
        47 software transactions of $1.0 or greater in fiscal 2001, 38 software
        transactions of $1.0 or greater in fiscal 2002 and 15 software
        transactions of $1.0 or greater in the nine months ended November 30,
        2002. As a result of these changes in the size of our software
        transactions, our quarterly revenue and financial performance have
        fluctuated significantly and may cause significant fluctuations in the
        future.

        WE EXPERIENCED DECLINES IN SOFTWARE REVENUE IN FISCAL 2002 AND THE FIRST
        THREE-QUARTERS OF FISCAL 2003. A REDUCTION IN OUR REVENUE DERIVED FROM
        SOFTWARE LICENSES HAS AND MAY IN THE FUTURE RESULT IN REDUCED SERVICES
        AND SUPPORT REVENUE.

                Our ability to maintain or increase services revenue depends on
        our ability to maintain or increase the amount of software we license to
        customers. During our fourth quarter fiscal 2002 and third quarter
        fiscal 2003 we have experienced a decline in services revenue as a
        result of decreasing software revenue. Additional decreases or slowdowns
        in licensing may further adversely impact our services and support
        revenues in future periods.

        IN OUR THIRD QUARTER OF FISCAL 2003 WE EXPERIENCED A SEQUENTIAL DECLINE
        IN SUPPORT REVENUE COMPARED TO OUR SECOND QUARTER OF FISCAL 2003
        RESULTING FROM BOTH THE RECENT DECLINE IN SOFTWARE REVENUE AND CLIENTS
        NOT RENEWING OR PARTIALLY RENEWING EXISTING SUPPORT CONTRACTS. FURTHER
        DECLINES IN SOFTWARE REVENUE, A REDUCTION IN THE RENEWAL RATE OF ANNUAL
        SUPPORT CONTRACTS, OR BOTH, COULD MATERIALLY HARM OUR BUSINESS.

                Our support revenue includes post-contract support and the
        rights to unspecified software upgrades and enhancements. Support
        contracts are generally renewable annually at the option of our
        customers. In the past, we have experienced high rates of renewed annual
        support contracts from our customers. If our customers fail to renew or
        to fully renew their support contracts at historical rates, our support
        revenue could materially decline.



                                       35



        WE HAVE A RECENT HISTORY OF SUPPLEMENTING OUR INTERNAL REVENUE GROWTH
        THROUGH ACQUISITIONS OF BUSINESSES AND TECHNOLOGY. ACQUISITIONS INCREASE
        BUSINESS RISK. WE HAVE EXPERIENCED DIFFICULTIES INTEGRATING ACQUISITIONS
        IN THE PAST.

                Acquisitions involve the integration of companies that have
        previously operated independently and increase the business risk of the
        acquiror. In February 1998 and June 1998 we made two acquisitions. The
        integration of the products and operations of these two acquisitions was
        negatively impacted by operational difficulties the Company was
        experiencing at the time. As a result, the products and operations of
        one of these acquisitions were never integrated and the Company
        abandoned the products acquired and the integration of the products and
        operations of the other was significantly retarded. In fiscal 2001 and
        2002 we acquired the products and operations of Talus, STG, OneRelease
        and Partminer, Inc.'s CSD business and the technology of SpaceWorks.
        During our first quarter of fiscal 2003, we acquired the assets and
        businesses of WDS and DFE. In connection with these and any future
        acquisitions, there can be no assurance that we will:

                -       effectively integrate employees, operations, products
                        and systems;

                -       realize the expected benefits of the transaction;

                -       retain key employees;

                -       effectively develop and protect key technologies and
                        proprietary know-how;

                -       avoid conflicts with our clients and business partners
                        that have commercial relationships or compete with the
                        acquired company;

                -       avoid unanticipated operational difficulties or
                        expenditures or both; and

                -       effectively operate our existing business lines, given
                        the significant diversion of resources and management
                        attention required to successfully integrate
                        acquisitions.

                Although we are not currently contemplating any acquisitions,
        future acquisitions may result in a dilution to existing shareholders to
        the extent we issue shares of our common stock as consideration or
        reduced liquidity and capital resources to the extent we use cash as
        consideration.

        IF THE MARKETS FOR OUR PRODUCTS DO NOT GROW OR FURTHER DECLINE, OUR
        BUSINESS WILL BE MATERIALLY AND ADVERSELY AFFECTED.

                Substantially all of our software, services and support revenue
        have arisen from, or are related directly to, our solutions. We expect
        to continue to be dependent upon these solutions in the future, and any
        factor adversely affecting the markets for our solutions would
        materially and adversely affect our ability to generate revenue. While
        we believe the markets for our solutions will expand as the economy
        improves, they may grow more slowly than in the past or anticipated. If
        the markets for our solutions further decline or do not grow as rapidly
        as we expect, revenue growth, operating margins, or both, could be
        adversely affected. The markets for our solutions have been and may
        continue to be adversely affected by continuing or further deteriorating
        economic or political conditions.

        OUR MARKETS ARE VERY COMPETITIVE, AND WE MAY NOT BE ABLE TO COMPETE
        EFFECTIVELY.

                The markets for our solutions are very competitive. The
        intensity of competition in our markets has significantly increased in
        part as a result of the deterioration in our markets, and we expect it
        to increase in the future. Our current and potential competitors may
        make acquisitions of other competitors and may establish cooperative
        relationships among themselves or with third parties. Some competitors
        are offering enterprise application software that competes with our
        applications at little or no charge as components of bundled products or
        on a stand-alone basis. Smaller


                                       36



        niche software companies have been and will likely continue to develop
        unique offerings that compete effectively with some of our solutions.
        Further, our current or prospective clients and partners may become
        competitors in the future. Increased competition has resulted and in the
        future could result in price reductions, lower gross margins, longer
        sales cycles and the loss of market share. Each of these developments
        could materially and adversely affect our growth and operating
        performance.

        MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER
        RESOURCES THAN WE DO, AND THEREFORE, WE MAY BE AT A DISADVANTAGE IN
        COMPETING WITH THEM.

                We directly compete with other enterprise application software
        vendors including: Adexa, Inc., Aspen Technology, Inc., The Descartes
        Systems Group, Inc., Global Logistics Technologies, Inc., i2
        Technologies, Inc., JDA Software, Inc., Khimetrics, Logility, Inc.,
        Logisitics.com (recently acquired by Manhattan Associates), Mercia,
        Metreo, PROS Revenue Management, Retek, Inc., Sabre, Inc., SAP AG,
        Viewlocity, Inc. (formerly SynQuest) and YieldStar Technology. In
        addition, some Enterprise Resource Planning ("ERP") software companies
        such as Invensys plc , J.D. Edwards & Company, Oracle Corporation,
        PeopleSoft, Inc. and SAP AG have acquired or developed and are
        developing solutions that compete with ours. Some of our current and
        potential competitors, particularly the ERP vendors, have significantly
        greater financial, marketing, technical and other competitive resources
        than us, as well as greater name recognition and a larger installed base
        of clients. In addition, many of our competitors have well-established
        relationships with our current and potential clients and have extensive
        knowledge of our industry. As a result, they may be able to adapt more
        quickly to new or emerging technologies and changes in client
        requirements or to devote greater resources to the development,
        promotion and sale of their products than we can. Any of these factors
        could materially impair our ability to compete and adversely affect our
        financial performance.

        IF THE DEVELOPMENT OF OUR PRODUCTS AND SERVICES FAILS TO KEEP PACE WITH
        OUR INDUSTRY'S RAPIDLY EVOLVING TECHNOLOGY, OUR FUTURE RESULTS MAY BE
        MATERIALLY AND ADVERSELY AFFECTED.

                The markets for our solutions are subject to rapid technological
        change, changing client needs, frequent new product introductions and
        evolving industry standards. The Company has historically been
        successful in keeping pace with these changes, but if we fail to do so
        in the future, our products and services may be rendered obsolete. Our
        product development and testing efforts have required, and are expected
        to continue to require, substantial investments. We recently released a
        web-native version of certain of our products and will continue to
        develop and release web-native versions of our products. We may not
        possess sufficient resources to continue to make further necessary
        investments in technology. Recent cutbacks in our workforce could
        lengthen the time necessary to develop our products. In addition, we may
        not successfully identify new software opportunities or develop and
        bring new software to market in a timely and efficient manner.

                Our growth and future operating results will depend, in part,
        upon our ability to continue to enhance existing applications and
        develop and introduce new applications or capabilities that:

                -       meet or exceed technological advances in the
                        marketplace;

                -       meet changing market and client requirements, including
                        rapid realization of benefits and the need to rapidly
                        manage and analyze increasingly large volumes of data;

                -       comply with changing industry standards;

                -       achieve market acceptance;

                -       integrate third-party software effectively; and

                -       respond to competitive offerings.



                                       37


                If we are unable, for technological or other reasons, to develop
        and introduce new and enhanced software in a timely manner, we may lose
        existing clients and fail to attract new clients, which may adversely
        affect our financial performance.

        DEFECTS IN OUR SOFTWARE OR PROBLEMS IN THE IMPLEMENTATION OF OUR
        SOFTWARE COULD LEAD TO CLAIMS FOR DAMAGES BY OUR CLIENTS, LOSS OF
        REVENUE OR DELAYS IN THE MARKET ACCEPTANCE OF OUR SOLUTIONS.

                Our software is complex. This complexity can make it difficult
        to detect errors or failure in our software prior to implementation. We
        may not discover errors in our software until our customers install and
        use a given product or until the volume of services that a product
        provides increases. When our software is installed, the environment into
        which it is installed is frequently complex and typically contains a
        wide variety of systems and third-party software, to which our software
        must be integrated. This can make the process of implementation
        difficult and lengthy. As a result, some customers may have difficulty
        or be unable to implement our products successfully within anticipated
        timeframes or otherwise achieve the expected benefits. These problems
        may result in claims for damages suffered by our clients, a loss of, or
        delays in, the market acceptance of our solutions, client
        dissatisfaction and potentially lost revenue and collection difficulties
        during the period required to correct these errors.

        WE UTILIZE THIRD-PARTY SOFTWARE THAT WE INCORPORATE INTO AND INCLUDE
        WITH OUR PRODUCTS AND SOLUTIONS, AND IMPAIRED RELATIONS WITH THESE THIRD
        PARTIES, DEFECTS IN THIRD-PARTY SOFTWARE OR THE INABILITY TO ENHANCE
        THEIR SOFTWARE OVER TIME COULD HARM OUR BUSINESS.

                We incorporate and include third-party software into and with
        our products and solutions. We are likely to incorporate and include
        additional third-party software into and with our products and solutions
        as we expand our product offerings. If our relations with any of these
        third-party software providers is impaired, and if we are unable to
        obtain or develop a replacement for the software, our business could be
        harmed. The operation of our products would be impaired if errors occur
        in the third-party software that we utilize. It may be more difficult
        for us to correct any defects in third-party software because the
        software is not within our control. Accordingly, our business could be
        adversely affected in the event of any errors in this software. There
        can be no assurance that these third parties will continue to invest the
        appropriate levels of resources in their products and services to
        maintain and enhance the software capabilities.


        WE UTILIZE THIRD PARTIES TO INTEGRATE OUR SOFTWARE WITH OTHER SOFTWARE
        PRODUCTS AND PLATFORMS. IF ANY OF THESE THIRD PARTIES SHOULD CEASE TO
        PROVIDE INTEGRATION SERVICES TO US, OUR BUSINESS, RESULTS OF OPERATIONS
        AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.

                We depend on companies such as Business Objectives, Peregrine
        (now Inovus), Tibco Software, Inc., Vignette Corporation, and
        webMethods, Inc. to integrate our software with software and platforms
        developed by third parties. If relations with any of these third-parties
        is impaired, and if we are unable to secure a replacement on a timely
        basis, our business could be harmed. If these companies are unable to
        develop or maintain software that effectively integrates our software
        and is free from defects, our ability to license our products and
        provide solutions could be impaired and our business could be harmed.
        There can be no assurance that those third-parties will continue to
        invest the appropriate level of resources in their products and services
        to maintain and enhance their software's capabilities.

        OUR EFFORTS TO DEVELOP AND SUSTAIN RELATIONSHIPS WITH VENDORS SUCH AS
        SOFTWARE COMPANIES, CONSULTING FIRMS, RESELLERS AND OTHERS TO IMPLEMENT
        AND PROMOTE OUR SOFTWARE PRODUCTS MAY FAIL, WHICH COULD HAVE A MATERIAL
        ADVERSE AFFECT ON OUR BUSINESS.

                We are developing, maintaining and enhancing significant working
        relationships with complementary vendors, such as software companies,
        consulting firms, resellers and others that we believe can play
        important roles in marketing our products and solutions. We are
        currently investing, and intend to continue to invest, significant
        resources to develop and enhance these relationships, which could
        adversely affect our operating margins. We may be unable to develop
        relationships with organizations that will be able to market our
        products effectively. Our arrangements with these organizations are not
        exclusive and, in many cases, may be terminated by either party



                                       38


        without cause. Many of the organizations with which we are developing or
        maintaining marketing relationships have commercial relationships with
        our competitors. Therefore, there can be no assurance that any
        organization will continue its involvement with us and our products. The
        loss of relationships with important organizations could materially and
        adversely affect our financial performance.

        AS A RESULT OF THE WDS ACQUISITION, AN INCREASED PERCENTAGE OF OUR
        REVENUE WILL BE DERIVED FROM CONTRACTS WITH THE GOVERNMENT. GOVERNMENT
        CONTRACTS ARE SUBJECT TO COST AUDITS BY THE GOVERNMENT AND TERMINATION
        FOR THE CONVENIENCE OF THE GOVERNMENT. A GOVERNMENT AUDIT OR GOVERNMENT
        TERMINATION OF ANY OF OUR CONTRACTS WITH THE GOVERNMENT COULD MATERIALLY
        HARM OUR BUSINESS.

                Although we have existing engagements for the Defense Logistics
        Agency, United States Navy and United States Airforce, the WDS
        acquisition will significantly increase the percentage of our revenue
        derived from contracts with the Government. Government contractors are
        commonly subject to various audits and investigations by Government
        agencies. One agency that oversees or enforces contract performance is
        the Defense Contract Audit Agency ("DCAA"). The DCAA generally performs
        a review of a contractor's performance on its contracts, its pricing
        practices, costs and compliance with applicable laws, regulations and
        standards and to verify that costs have been properly charged to the
        Government. Although the DCAA has completed an initial review of our
        accounting practices and procedures allowing us to invoice the
        government, it has yet to exercise its option to perform an audit of our
        actual invoicing of Government contracts. These audits may occur several
        years after completion of the audited work. If an audit were to identify
        significant unallowable costs, we could have a material charge to our
        earnings or reduction to our cash position as a result of the audit and
        this could materially harm our business.

                In addition, Government contracts may be subject to termination
        by the Government for its convenience, as well as termination, reduction
        or modification in the event of budgetary constraints or any change in
        the Government's requirements. If one of our time-and-materials or
        fixed-priced contracts were to be terminated for the Government's
        convenience, we would only receive the purchase price for items
        delivered prior to termination, reimbursement for allowable costs for
        work-in-progress and an allowance for profit on the contract, or an
        adjustment for loss if completion of performance would have resulted in
        a loss. Government contracts are also conditioned upon the continuing
        availability of Congressional appropriations. Congress usually
        appropriates funds on a fiscal-year basis, even though the contract
        performance may extend over many years. Consequently, at the outset of a
        program, the contract is usually only partially funded and Congress must
        annually determine if additional funds will be appropriated to the
        program. As a result, long-term contracts are subject to cancellation if
        appropriations for future periods become unavailable. We have not
        historically experienced any significant material adverse effects as a
        result of the Government's failure to fund programs awarded to us. If
        the Government were to terminate some or all of our contracts or reduce
        and/or cancel appropriations to a program we have a contract with, our
        business could be materially harmed.


        THE LIMITED ABILITY OF LEGAL PROTECTIONS TO SAFEGUARD OUR INTELLECTUAL
        PROPERTY RIGHTS COULD IMPAIR OUR ABILITY TO COMPETE EFFECTIVELY.

                Our success and ability to compete are substantially dependent
        on our internally developed technologies and trademarks, which we
        protect through a combination of confidentiality procedures, contractual
        provisions, patent, copyright, trademark and trade secret laws. Despite
        our efforts to protect our proprietary rights, unauthorized parties may
        copy aspects of our products or obtain and use information that we
        regard as proprietary. Policing unauthorized use of our products is
        difficult, particularly in certain foreign countries, including, among
        others, The Peoples Republic of China. We are unable to determine the
        extent to which piracy of our software products exists. In addition, the
        laws of some foreign countries do not protect our proprietary rights to
        the same extent as the laws of the United States. Furthermore, our
        competitors may independently develop technology similar to ours.

        OUR PRODUCTS MAY INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF
        OTHERS, WHICH MAY CAUSE US TO INCUR UNEXPECTED COSTS OR PREVENT US FROM
        SELLING OUR PRODUCTS.




                                       39


                The number of intellectual property claims in our industry may
        increase as the number of competing products grows and the functionality
        of products in different industry segments overlaps. In recent years,
        there has been a tendency by software companies to file substantially
        increasing numbers of patent applications, including those for business
        methods and processes. We have no way of knowing what patent
        applications third parties have filed until the application is filed or
        until a patent is issued. Patent applications are often published within
        18 months of filing, but it can take as long as three years or more for
        a patent to be granted after an application has been filed. Although we
        are not aware that any of our products infringe upon the proprietary
        rights of third parties, there can be no assurance that third parties
        will not claim infringement by us with respect to current or future
        products. Any of these claims, with or without merit, could be
        time-consuming to address, result in costly litigation, cause product
        shipment delays or require us to enter into royalty or license
        agreements. These royalty or license agreements might not be available
        on terms acceptable to us or at all, which could materially and
        adversely affect our financial performance.

        OUR INTERNATIONAL OPERATIONS POSE RISKS FOR OUR BUSINESS AND FINANCIAL
        CONDITION.

                We currently conduct operations in Australia, Belgium, Brazil,
        Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico,
        Taiwan, The Netherlands, The Peoples Republic of China, Singapore,
        Sweden and the United Kingdom. We intend to expand our international
        operations and to increase the proportion of our revenue from outside
        the U.S. These operations require significant management attention and
        financial resources and additionally subject us to risks inherent in
        doing business internationally, such as:

                -       failure to properly comply with foreign laws and
                        regulations applicable to our foreign activities;

                -       failure to properly comply with U.S. laws and
                        regulations relating to the export of our products and
                        services;

                -       difficulties in managing foreign operations and
                        appropriate levels of staffing;

                -       longer collection cycles;

                -       tariffs and other trade barriers;

                -       seasonal reductions in business activities, particularly
                        throughout Europe;

                -       proper compliance with local tax laws which can be
                        complex and may result in unintended adverse tax
                        consequences; and

                -       increasing political instability and adverse economic
                        conditions in many of these countries.

                Our failure to properly comply or address any of the above
        factors could adversely affect the success of our international
        operations and could have a material adverse effect on our financial
        performance.

        CHANGES IN THE VALUE OF THE U.S. DOLLAR, IN RELATION TO THE CURRENCIES
        OF FOREIGN COUNTRIES WHERE WE TRANSACT BUSINESS, COULD HARM OUR
        OPERATING RESULTS.

                In the nine months ended November 30, 2002, 24.5% of our total
        revenue was derived from outside the United States. Our primary
        international operations are located throughout Europe and Asia-Pacific.
        We also have operations in Brazil, Canada and Mexico. Our international
        revenue and expenses are denominated in foreign currencies, typically
        the local currency of the selling business unit. Therefore, changes in
        the value of the U.S. Dollar as compared to these other currencies may
        adversely affect our operating results. We intend to expand our
        international operations and to increase the proportion of our revenue
        from outside the U.S. For example, we opened offices in Hong Kong,
        Malaysia and Mainland China recently. We expect to use an increasing
        number of foreign currencies, causing our exposure to currency exchange
        rate fluctuations to increase. We generally do not


                                       40




        implement hedging programs to mitigate our exposure to currency
        fluctuations affecting international accounts receivable, cash balances
        and intercompany accounts, and we do not hedge our exposure to currency
        fluctuations affecting future international revenues and expenses and
        other commitments. For the foregoing reasons, currency exchange rate
        fluctuations have caused, and likely will continue to cause, variability
        in our foreign currency denominated revenue streams and our cost to
        settle foreign currency denominated liabilities, which could have a
        material adverse effect on our financial performance.


        WE MAY BE SUBJECT TO FUTURE LIABILITY CLAIMS, AND THE REPUTATIONS OF OUR
        COMPANY AND PRODUCTS MAY SUFFER.

                Many of our implementations involve projects that are critical
        to the operations of our clients' businesses and provide benefits that
        may be difficult to quantify. Any failure in a client's system could
        result in a claim for substantial damages against us, regardless of our
        responsibility for the failure. We have entered into and plan to
        continue to enter into agreements with software vendors, consulting
        firms, resellers and others whereby they market our solutions. If these
        vendors fail to meet their clients' expectations or cause failures in
        their clients' systems, the reputation of our company and products could
        be materially and adversely affected even if our software products
        perform in accordance with their functional specifications.

        IF REQUIREMENTS RELATING TO ACCOUNTING TREATMENT FOR EMPLOYEE STOCK
        OPTIONS ARE CHANGED, WE MAY BE FORCED TO CHANGE OUR BUSINESS PRACTICES.

                We currently account for the issuance of stock options under APB
        Opinion No. 25, "Accounting for Stock Issued to Employees." If proposals
        currently under consideration by accounting standards organizations and
        governmental authorities are adopted, we may be required to treat the
        value of the stock options granted to employees as a compensation
        expense. As a result, we could decide to reduce the number of stock
        options granted to employees or to grant options to fewer employees.
        This could affect our ability to retain existing employees and attract
        qualified candidates, and increase the cash compensation or benefits we
        would have to pay to them. In addition, such a change could have a
        material effect on our financial performance.

        IT MAY BECOME INCREASINGLY EXPENSIVE TO OBTAIN AND MAINTAIN INSURANCE.

                We obtain insurance to cover a variety of potential risks and
        liabilities. In the current market, insurance coverage is becoming more
        restrictive and when insurance coverage is offered, the deductible for
        which we are responsible is larger and premiums have increased
        substantially. As a result, it may become more difficult to maintain
        insurance coverage at historical levels, or if such coverage is
        available, the cost to obtain or maintain it may increase substantially.
        This may result in our being forced to bear the burden of an increased
        portion of risks for which we have traditionally been covered by
        insurance, which could have a material effect on our financial
        performance.

                          RISKS RELATED TO OUR INDUSTRY

        OUR FUTURE GROWTH IS SUBSTANTIALLY DEPENDENT ON THE CONTINUED SUCCESS OF
        THE INTERNET AS A RELIABLE AND SECURE COMMERCIAL MEDIUM. THE FAILURE OF
        THE INTERNET AS A RELIABLE AND SECURE COMMERCIAL MEDIUM WOULD BE
        DETRIMENTAL TO OUR FINANCIAL PERFORMANCE.

                The growth of the Internet increased demand for our solutions,
        as well as created markets for new and enhanced product offerings.
        Therefore, our future sales and financial performance are substantially
        dependent upon the Internet as a reliable and secure commercial medium.
        The continued success of the Internet as a reliable and secure
        commercial medium may be adversely affected for a number of reasons,
        including:

                -       potentially inadequate development of network
                        infrastructure, delayed development of enabling
                        technologies, performance improvements and security
                        measures;

                -       sustained disruptions in the accessibility, security and
                        reliability;



                                       41


                -       delays in the development or adoption of new standards
                        and protocols required to handle increased levels of
                        Internet activity;

                -       increased taxation and governmental regulation; or

                -       changes in, or insufficient availability of,
                        communications services to support the Internet,
                        resulting in slower Internet user response times.

                The occurrence of any of these factors could require us to
        modify our technology and our business strategy. We have expended
        significant amounts of resources to develop and deploy our products
        using the internet as a medium. Any such modifications could require us
        to expend significant additional amounts of resources. In the event that
        the Internet does not remain a viable and secure commercial medium, our
        financial performance could be materially and adversely affected.

        NEW LAWS OR REGULATIONS AFFECTING THE INTERNET OR COMMERCE IN GENERAL
        COULD REDUCE OUR REVENUE AND ADVERSELY AFFECT OUR GROWTH.

                Congress and other domestic and foreign governmental authorities
        have adopted and are considering legislation affecting the use of the
        Internet, including laws relating to the use of the Internet for
        commerce and distribution. The adoption or interpretation of laws
        regulating the Internet, or of existing laws governing such things as
        taxation of commerce, consumer protection, libel, property rights and
        personal privacy, could hamper the growth of the Internet and its use as
        a communications and commercial medium. If this occurs, companies may
        decide not to use our products or services, and our business, operating
        results and financial condition could suffer.

                        RISKS RELATED TO OUR COMMON STOCK

        OUR STOCK PRICE HAS BEEN AND IS LIKELY TO CONTINUE TO BE VOLATILE. WE
        HAVE RECENTLY EXPERIENCED SIGNIFICANT DECLINES IN OUR STOCK PRICE DUE TO
        OUR POOR FINANCIAL PERFORMANCE.

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

                -       actual or anticipated variations in quarterly operating
                        results and continuing losses;

                -       continued or deteriorating adverse economic, political
                        and market conditions;

                -       announcements of technological innovations;

                -       new products or services offered by us or our
                        competitors;

                -       changes in financial estimates and ratings by securities
                        analysts;

                -       changes in the performance, market valuations, or both,
                        of our current and potential competitors and the
                        software industry in general;

                -       our announcement or a competitors' announcement of
                        significant acquisitions, strategic partnerships, joint
                        ventures or capital commitments;

                -       adoption of industry standards and the inclusion of our
                        technology in, or compatibility of our technology with,
                        such standards;

                -       adverse or unfavorable publicity regarding us, or our
                        products and services or implementations;




                                       42



                -       adverse or unfavorable publicity regarding our
                        competitors, including their products and
                        implementations;

                -       additions or departures of key personnel;

                -       sales or anticipated sales of additional debt or equity
                        securities; and

                -       other events or factors that may be beyond our control.

                In addition, the stock markets in general, The Nasdaq National
        Market and the equity markets for software companies in particular, have
        experienced extraordinary price and volume volatility in recent years.
        Such volatility has adversely affected the stock prices for many
        companies irrespective of, or disproportionately to, the operating
        performance of these companies. These broad market and industry factors
        may materially and adversely further affect the market price of our
        common stock, regardless of our actual operating performance.

        OUR CHARTER AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS THAT COULD
        DISCOURAGE A TAKEOVER EVEN IF BENEFICIAL TO STOCKHOLDERS.

                Our charter and our bylaws, in conjunction with Delaware law,
        contain provisions that could make it more difficult for a third party
        to obtain control of us even if doing so would be beneficial to
        stockholders. For example, our bylaws provide for a classified board of
        directors and allow our board of directors to expand its size and fill
        any vacancies without stockholder approval. Furthermore, our board has
        the authority to issue preferred stock and to designate the voting
        rights, dividend rate and privileges of the preferred stock, all of
        which may be greater than the rights of common stockholders.


        ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

                Foreign Currency Risk. We are subject to risk from changes in
        foreign exchange rates for our subsidiaries which use a foreign currency
        as their functional currency and are translated into U.S. dollars. Such
        changes could result in cumulative translation gains or losses that are
        included in shareholders' equity. Revenue outside of the United States
        was 27.8% and 30.5% for the three months ended November 30, 2002 and
        2001, respectively, and 24.5% and 27.8% for the nine months ended
        November 30, 2002 and 2001, respectively. Revenue outside the United
        States is derived from operations in Australia, Belgium, Brazil, Canada,
        China, France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico,
        Netherlands, Singapore, Spain, Sweden, Taiwan and the United Kingdom.
        Exchange rate fluctuations between the U.S. dollar and the currencies of
        these countries result in positive or negative fluctuations in the
        amounts relating to foreign operations reported in our consolidated
        financial statements. None of the components of our financial statements
        were materially affected by exchange rate fluctuations during the three
        and nine months ended November 30, 2002 and 2001. We generally do not
        use foreign currency options and forward contracts to hedge against the
        earnings effects of such fluctuations. While we do not expect to incur
        material losses as a result of this currency risk, there can be no
        assurance that losses will not result.

                Interest Rate Risk. Our marketable securities and certain cash
        equivalents are subject to interest rate risk. We manage this risk by
        maintaining an investment portfolio of available-for-sale instruments
        with high credit quality and relatively short average maturities. These
        instruments include, but are not limited to, commercial paper,
        money-market instruments, bank time deposits and variable rate and fixed
        rate obligations of corporations and national, state and local
        governments and agencies, in accordance with an investment policy
        approved by our Board of Directors. These instruments are denominated in
        U.S. dollars. The fair market value of marketable securities held was
        $5.3 million and $4.3 million at November 30, 2002 and February 28,
        2002, respectively.

                We also hold cash balances in accounts with commercial banks in
        the United States and foreign countries. These cash balances represent
        operating balances only and are invested in short-term deposits of the
        local bank. Such operating cash balances held at banks outside of the
        United States are denominated in the local currency.



                                       43



                The United States Federal Reserve Board influences the general
        market rates of interest. During calendar 2001, the Federal Reserve
        Board decreased the federal funds rate several times, by 475 basis
        points, to 1.75%. During the three months ended November 30, 2002, the
        federal funds rate was further reduced by 50 basis points to 1.25%.
        These actions have led to a general market decline in interest rates.

                The weighted average yield on interest-bearing investments held
        as of November 30, 2002 and 2001 was approximately 1.4% and 2.9%,
        respectively. Based on our investment holdings at November 30, 2002, a
        100 basis point decline in the average yield would reduce our annual
        interest income by $1.5 million.


                ITEM 4. CONTROLS AND PROCEDURES

                Evaluation of Disclosure Controls and Procedures. Our chief
        executive officer and our chief financial officer, after evaluating the
        effectiveness of the Company's "disclosure controls and procedures" (as
        defined in the Securities Exchange Act of 1934 Rules 13a-14(c)) as of a
        date (the "Evaluation Date") within 90 days before the filing date of
        this quarterly report, have concluded that as of the Evaluation Date,
        our disclosure controls and procedures were effective to ensure that
        material information relating to us and our consolidated subsidiaries is
        recorded, processed, summarized and reported in a timely manner.

                Changes in Internal Controls. There were no significant changes
        in our internal controls or, to our knowledge, in other factors that
        could significantly affect such controls subsequent to the Evaluation
        Date.


                           PART II - OTHER INFORMATION

                ITEM 5. OTHER INFORMATION

                Relationship with Warburg Pincus. In October 2002, we appointed
        William H. Janeway, a Vice-Chairman of Warburg Pincus LLC, a private
        equity investment firm, as a Class III director of our Board of
        Directors, with a term expiring in 2004. In connection with Dr.
        Janeway's appointment to the Board, we entered into an agreement with
        Warburg Pincus Private Equity VIII, L.P. in which we consented to the
        acquisition by Warburg Pincus and certain of its affiliates of up to
        19.9% of our common stock and agreed that for as long as Warburg
        Pincus and is affiliates beneficially own at least ten percent (10%) of
        our common stock, we would nominate and use our best efforts to have
        elected to our Board one person designated by Warburg Pincus and
        reasonably acceptable to us. In addition, Warburg Pincus agreed that,
        for the duration of the standstill period, neither it nor its affiliates
        would acquire more than 19.9% of our common stock.

        The standstill period is the earlier of:

        -       three years;
        -       the date on which another person acquires more than 15% of our
                common stock with our consent and on terms more favorable than
                those obtained by Warburg Pincus; or
        -       the date on which we fail to perform our agreements with respect
                to the acquisition of additional shares by Warburg Pincus and
                the election of a director designated by Warburg Pincus.

                At the time the agreement was entered into, Warburg Pincus and
        certain of its affiliates held approximately 10.9% of our common stock.


        ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a) Exhibits



        10.1    Second Amendment to the Amended and Restated Financing Agreement
                and Form of Revolving Promissory Note dated November 22, 2002 by
                the Company in favor of Bank of America, N.A.


                                       44


        10.2    Termination of Employment Agreement dated January 3, 2003
                between the Company and Terrance A. Austin.

        10.3    Standstill Agreement dated October 24, 2002 between Manugistics
                Group, Inc and Warburg Pincus Private Equity VIII, L.P., which
                is incorporated by reference Exhibit 10 of our Current Report on
                Form 8-K filed on October 25, 2002.



(b)      Reports on Form 8-K

1.       On October 25, 2002, we filed a Current Report on Form 8-K announcing
         the appointment of Dr. William H. Janeway of Warburg Pincus LLC to the
         Company's Board of Directors and the resignation of Dr. Hau Lee from
         the Company's Board of Directors. The Company also announced that, in
         connection with Dr. Janeway's appointment to the Board, the Company had
         consented to the acquisition of up to 19.9% of the common stock of the
         Company by Warburg Pincus Private Equity VIII, L.P. and certain of its
         affiliates.




                                       45




                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on January 14, 2003.

MANUGISTICS GROUP, INC.
(Registrant)


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



Date:    January 14, 2003

                                         /s/Raghavan Rajaji
                                        -------------------
                                         Raghavan Rajaji
                                         Executive Vice President and
                                            Chief Financial Officer
                                         (Principal financial officer)

                                         /s/ Jeffrey T. Hudkins
                                        -----------------------
                                         Jeffrey T. Hudkins
                                         Vice President, Controller and
                                            Chief Accounting Officer
                                         (Principal accounting officer)




                                       46




                                 CERTIFICATIONS
I, Gregory J Owens, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Manugistics Group,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a)      designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

        b)      evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

        c)      presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

        a)      all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

        b)      any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and


6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Dated: January 14, 2003            By:      /s/ Gregory J. Owens
===============================================================================
                                           Gregory J. Owens
                                           Chairman and Chief Executive Officer
                                           Principal Executive Officer





                                       47





I, Raghavan Rajaji, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Manugistics Group,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a)      designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

        b)      evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

        c)      presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;


5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

        a)      all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

        b)      any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Dated: January 14, 2003                 By:      /s/ Raghavan Rajaji
============================================================================
                                                Raghavan Rajaji
                                                Executive Vice President and
                                                Chief Financial Officer
                                                (Principal Financial Officer)




The certification required by Section 906 of the Sarbanes-Oxley Act of 2002 is
being furnished to the Securities and Exchange Commission under separate
correspondence concurrently with this filing.


                                       48