BackWeb Reports Q2 Revenue, Earnings in Line with Preliminary Results

Signs Strategic Partnership with a Major Enterprise Portal Systems Integrator and Solutions Provider

SAN JOSE, Calif., July 31, 2001 – BackWeb Technologies (Nasdaq: BWEB), a leading provider of ProactivePortal™ technologies and push infrastructure for the enterprise, today announced results for its second quarter ended June 30, 2001.

Revenues for the second quarter of 2001 were $4.6 million compared with $10.6 million for the same period last year and $7.2 million reported in the first quarter of 2001. Net loss for the second quarter of 2001 was $8.2 million, or a loss of $0.21 per share. This compares with a net loss of $1.1 million, or a loss of $0.03 per share in the same period last year and a loss of $7.0 million, or a loss of $0.18 per share, in the first quarter of 2001 (excluding amortization, charges related to previous acquisition(s), deferred stock compensation and a one time write-off of an equity investment in the second quarter of 2001). Including these charges, net loss for the second quarter of 2001 was $11.6 million, or a loss of $0.30 per share (of which $2.5 million, or a loss of $0.07 per share, was attributable to the write-off of an equity investment) compared with a net loss of $9.8 million, or a loss of $0.26 per share (of which $8.4 million or, a loss of $0.22 per share, was attributable to the initial write-off of the acquisition of intellectual property) in the same period last year and $7.9 million, or a loss of $0.21 per share in the first quarter of 2001.

The company has completed the 25 percent worldwide workforce reduction it announced on July 2, 2001. This reduction was completed in the month of July and the company will incur associated special charges in the range of $1.5 - $1.8 million in its third fiscal quarter, ending September 30, 2001. In addition to the workforce reduction, the company has recently implemented other cost-saving programs to better align expenses with revenues. These programs include cuts in executive compensation as well as reducing the budgets of various non-core projects. The company expects that these cuts, along with the workforce reduction, will result in annualized savings of approximately $12 - $13 million, starting in the third quarter of 2001.

The company also announced today that it signed a strategic partnership with a major enterprise portal systems integrator and solutions provider – one of the top five – and initial revenues from this new relationship are expected to occur in the beginning of 2002. BackWeb continued to increase its presence in the Global 2000 market in the second quarter with major customer wins including General Electric, IBM Canada and Eastman Kodak, among others. This quarter the company unveiled its new e-Accelerator for enterprise video communications product. This new offering enables enterprise organizations to combine the urgency and impact of face-to-face communication with the broad distribution capabilities of the Web to deliver audio/video communications across both high- and low-bandwidth connections.

"The slowdown in IT spending clearly continues to impact our business," said Eli Barkat, chairman and CEO of BackWeb Technologies. "However, we are confident that our strategies to realign the BackWeb business model with the evolving needs of the enterprise information portal market will begin to see results soon. We also remain focused on other core components of our business strategy: strengthening our existing partnerships and customer relationships while forging new ones, and protecting our strong cash position," he said.

Conference Call
BackWeb will be releasing its full results for the second quarter of 2001 on Tuesday, July 31 before the market opens. A conference call will be held following the earnings release at 5:30 a.m. Pacific Time the same day. Those wishing to join should dial 415-228-3886, passcode ``BackWeb'' at approximately 5:15 a.m. A live webcast of the conference call will also be available via the company's website at www.backweb.com. A replay of the call will be available starting one hour after the completion of the call until Aug. 7, 2001. To access the replay, please dial 402-998-0772.