BackWeb Reports Q3 Financial Results

Q3 Financials, Business Goals and Milestones Meet Plans

SAN JOSE, Calif., Oct. 24, 2001 – BackWeb Technologies (Nasdaq: BWEB), the leading provider of ProactivePortal™ technologies for the enterprise, today announced results for its third quarter ended September 30, 2001.

Revenues for the third quarter of 2001 were $4.5 million compared with $11.7 million for the same period last year and $4.6 million reported in the second quarter of 2001. Net loss for the third quarter of 2001 was $5.5 million, or a loss of $0.14 per share. This compares with a net loss of $500,000, or a loss of $0.01 per share in the same period last year and a loss of $8.2 million, or a loss of $0.21 per share, in the second quarter of 2001. These figures exclude amortization related to goodwill, other intangibles and deferred stock compensation and a one-time restructuring charge in the third quarter of 2001.

Including charges, net loss for the third quarter of 2001 was $9.2 million, or a loss of $0.24 per share (of which $2.8 million, or a loss of $0.07 per share, was attributable to a one-time restructuring charge) compared with a net loss of $1.5 million, or a loss of $0.04 per share in the same period last year and $11.6 million, or a loss of $0.30 per share in the second quarter of 2001 (of which $2.5 million, or a loss of $0.07 per share, was attributable to the write-down of an equity investment).

"We are pleased that this quarter was executed as planned and that we are encountering solid indications that the latest terror and computer virus events have raised the need and awareness for critical and reliable communications within many of our potential customers," said Eli Barkat, chairman and CEO of BackWeb Technologies. "During the third quarter, we made great progress building our future prospects in our new Portal strategy. We also successfully launched the BackWeb® ProactivePortal Server™, our first offering in the Portal market, and we experienced accelerated momentum in industry recognition supporting its value. We expect to see the success of our new portal strategy and strategic relationships impact our financial results beginning in the second half of 2002."

Quarterly Highlights

Customers
During the third quarter BackWeb's sales to customers included many Global 2000 companies including Procter & Gamble, Renault, Borsa Italiana, Nikko Securities, Owens Illinois, Rogers Communications and Automatic Data Processing amongst others. In addition to other applications, customers licensed BackWeb technology to improve mobile user productivity via offline access, to accelerate business velocity via Proactive™ notifications and to improve emergency and executive communications via scalable video delivery and Proactive notifications.

BackWeb also continued to provide consulting and implementation services to expand the use of the BackWeb technology to many of its existing blue chip customers including IBM Canada, ISI Mars, ABB, BMW, British Telecom, Siemens and Guidant among others.

Products
In September, BackWeb began shipment of its new offering in the portal market, the BackWeb ProactivePortal Server. This product supports the company's strategic efforts to become a de-facto technology in the portal space, which is emerging as a critical IT priority. The BackWeb ProactivePortal offering addresses inherent portal limitations where ‘must have' information is regularly missed, not accessed on time, or not available when on the road. The ProactivePortal offering enables companies to ensure that their portal content is not just available, but actually used, thus enhancing ROI potential for their portals. Two unique capabilities delivered by this offering are offline portal access and ProactivePortal notifications, both increasingly acknowledged as "must-have" portal requirements. The company believes the product, with its broad applications, portal-independent architecture and high technology barriers, is uniquely positioned to become a de-facto element of portal solutions. Industry experts have estimated that the portal market will reach a $6.2 billion market by 2003.

In addition, BackWeb also expanded its BackWeb e-Accelerator™ product line with the shipment of its new offline access user interface, BackWeb Shadow™. The enhanced product is being received well by the market and is currently being used by IBM Canada and
Hewlett- Packard.

Industry Support
BackWeb's ProactivePortal prospects garnered strong industry recognition momentum during the quarter. For example, industry experts from Gartner Group and Meta Group published reports during the quarter reiterating the importance of offline access and "Proactive" notification as must-have capabilities for enterprise portals. Yankee Group and Delphi Group also endorsed these capabilities. Also during the quarter, BackWeb Technologies was named Silicon Valley's Third Fastest Growing Technology Company in Deloitte & Touche's Fast 50 Program. The Ranking was based on the percentage of growth in revenues for the five-year period from 1996-2000.

Expense Reductions
During the third quarter the company completed a 25 percent workforce reduction, which together with other expense reduction initiatives, equaled a 15 percent expense reduction over the second quarter run-rate.

Conference Call
Management will hold a conference call to discuss these results today, Oct. 24, at 2:00 p.m. Pacific Time. Those wishing to join should dial (415) 228-3886, passcode "BackWeb" at approximately 1:45 p.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 Oct. 31, 2001. To access the replay, please dial (402) 998-1728.