COSTA MESA, Calif., July 19 /PRNewswire/ -- FileNET Corporation
(Nasdaq: FILE) today reported results for its second quarter ended June 30,
1999.  Revenue was a record $86.1 million, up 7 percent from $80.4 million for
the second quarter of 1998.  Software revenues grew 10 percent over the same
quarter last year, while professional services continued its solid growth with
an increase of 24 percent.  Net income for the quarter was $3.9 million or
12 cents per diluted share, compared to net income of $4.6 million or 14 cents
per diluted share for the second quarter of 1998.
    For the six months ended June 30, 1999, revenue was $167.5 million with
net income of $5.9 million or 18 cents per diluted share.  For the six months
ended June 30, 1998, revenue was $154.0 million with net income of
$7.2 million or 21 cents per diluted share.
    As of June 30, 1999, FileNET's balance sheet included total cash and
marketable securities of $94 million, total stockholders' equity of
$134 million and no long-term debt.
    "Eleven customers placed orders in excess of $1 million, one of which was
the largest single order in the company's history.  These large orders reflect
the continued market demand for FileNET Web-based content management software
solutions.  Additionally, they reflect an expansion of the applications for
our product set and our customers' desire to roll out much larger
implementations," stated Lee Roberts, president and CEO.  "Farmers Insurance
Group of Companies ordered $8.7 million of FileNET software when it selected
us, along with our strategic partner Siebel Systems, to serve as the
cornerstones for a revolutionary redesign of its claims processing network.
Farmers plans to empower agents to provide customers with a single point of
contact for claims reporting and restoration assistance, thereby bolstering
agent productivity and customer satisfaction.  Customer Relationship
Management (CRM) is a key component of our solutions focused strategy and the
Farmers win is illustrative of the many CRM opportunities our sales force and
partners are pursuing.
    "The Panagon Product family has been well accepted in the marketplace,
with 94,000 seats sold in the quarter.  Panagon was formally launched in
February 1998 and, since that time, we have shipped more than four hundred
thousand seats.  Of these 34% are Web-based client implementations.  We are
playing a significant role in enabling our customers to exploit the
capabilities of the Internet in their businesses.
    "During the second quarter, we introduced Panagon 2000(TM), a major
evolutionary extension of the Panagon family of software.  Customers and
industry analysts have applauded Panagon 2000's comprehensive integration with
Microsoft(R) platform technologies (including: Microsoft SQL Server 7.0(R),
Microsoft Office 2000(R), Microsoft Windows(R), and Microsoft Exchange(R)) as
well as its greatly expanded capability to control and manage compound and
relational documents," stated Roberts.  "Panagon 2000 also allows users and
partners to create solutions that seamlessly integrate with Microsoft
Outlook(R) and Lotus(R) Notes environments.
    "We are confident in the longer term outlook for this market and believe
we are well positioned to take advantage of the industry growth forecasted by
a number of market analysts," continued Roberts.  "We are, however, being
cautious relative to expense increases in the second half of the year due to
the market uncertainty revolving around the unknown issues related to Y2K
generally."
    This press release contains forward-looking statements regarding the
company's future performance.  Those statements and the company's future
results of operations are subject to risks and uncertainties.  Revenues and
operating results for the period discussed in this release and prior periods
may not be predictive of the company's future financial results.  For a
detailed discussion of the risk factors and uncertainties that affect the
company's future results, please refer to "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain
Considerations" in the company's Annual Report for the year ended December 31,
1998; "Business -- Certain Considerations" in the company's Annual Report on
Form 10-K for the year ended December 31, 1998; and the company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999.  Such risk factors
and uncertainties include, but are not limited to, the timing of, and
fluctuations in orders for the company's products which may in part be
affected by the Y2K issue; the mix of products and services sold by the
company; general conditions in the worldwide economy and the
software/technology sector; timely development and introduction of new
products to respond to customer demands; announcements of technological
innovations, new products or product enhancements by the company or its
competitors; key management changes; changes in joint marketing and
development programs; developments relating to patents or other intellectual
property rights or disputes; and developments in the company's relationships
with its customers, distributors and suppliers.  The actual results that the
company achieves may differ materially from any forward-looking statements due
to such risks and uncertainties.

    About FileNET
    FileNET Corporation is the industry leader in providing Web-based content
management software solutions to help corporate and government organizations
better manage their digital content and business processes.  Headquartered in
Costa Mesa, Calif., the company markets its innovative products in more than
70 countries through its own global sales, professional services and support
organization as well as via its ValueNET partner program of resellers, system
integrators and application developers.  Founded in 1982, the company
currently employs more than 1,700 people.
    For complete corporate and product information, visit the FileNET Web site
at: http://www.filenet.com .

    FileNET and ValueNET are registered trademarks and Panagon and Panagon
2000 are trademarks of FileNET Corp.  All other named products mentioned in
this release may have been identified by trademarks or registered trademarks
of their respective holders.


                             FileNET CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)

                              Quarter Ended June 30,   Six Months Ended June 30,
                                 1999       1998           1999        1998
                             (Unaudited) (Unaudited)   (Unaudited)  (Unaudited)
    Revenue:
     Software                 $48,651       $44,403     $90,635      $87,650
     Service                   33,893        29,467      67,320       52,938
     Hardware                   3,545         6,502       9,576       13,393
     Total revenue             86,089        80,372     167,531      153,981

    Costs and expenses:
     Cost of software revenue   4,663         4,265       8,624        7,951
     Cost of service revenue   20,515        16,967      40,819       31,313
     Cost of hardware revenue   1,867         3,238       5,033        6,598
     Research and development  13,234        11,820      26,336       23,894
     Selling, general and
      administrative           40,746        38,585      80,191       76,152
    Total costs and expenses   81,025        74,875     161,003      145,908

    Operating income            5,064         5,497       6,528        8,073

    Other income, net             499         1,031       1,960        2,010

    Income before income taxes  5,563         6,528       8,488       10,083

    Provision for income taxes  1,669         1,893       2,546        2,924

     Net income                $3,894        $4,635      $5,942       $7,159

    Earnings per share:
     Basic                      $0.12         $0.15       $0.19        $0.23
     Diluted                    $0.12         $0.14       $0.18        $0.21

    Weighted average
     shares outstanding:
      Basic                    32,066        30,801      31,990       30,501
      Diluted                  32,563        34,097      32,558       33,530

    Earnings per share for all periods presented have been restated to reflect
a two-for-one stock split in June 1998.
    Note:  Certain re-classifications have been made to the prior-year's
balances to conform to the current year's presentation.


                             FileNET CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                                    June 30,      December 31,
                                                      1999           1998
                                                  (Unaudited)
    ASSETS
    Current assets:
      Cash and short-term marketable securities      $71,911        $71,304
      Accounts receivable, net                        67,512         61,636
      Inventories                                      3,115          2,419
      Prepaid expenses and other current assets        7,731          8,865
      Total current assets                           150,269        144,224

    Property, net                                     42,302         44,177
    Long-term marketable securities                   22,370         10,885
    Deferred Income Taxes                              6,433          6,385
    Other assets                                       1,401          1,151

      Total assets                                  $222,775       $206,822

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                                15,048         21,022
      Accrued liabilities                             72,608         54,538
      Deferred income taxes                              953            942
      Total current liabilities                       88,609         76,502

    Stockholders' equity                             134,166        130,320

      Total liabilities and stockholders' equity    $222,775       $206,822

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