For the nine months ended June 30, 1999, NetObjects, Inc. reported that revenues increased 52 percent to $16.4 million compared to revenues of $10.8 million for the same nine-month period in fiscal year 1998. Reported net loss for the nine months was $22.7 million or $3.31 per share, including non-cash, non-recurring charges for a beneficial conversion feature of convertible debt, and accretion of discount on debt retired in May 1999, totaling $1.7 million and $7.5 million, respectively.  Those expenses were the final charges related to the debt, which the company retired at the time of the IPO.  Excluding those charges, the Company would have reported a net loss of $13.6 million or $1.99 per share for the nine months ended June 30, 1999, compared to a net loss of $16.7 million or $9.18 per share for the same nine-month period in fiscal year 1998. The company had an operating loss of $12.4 million or $1.81 per share, compared to an operating loss of $15.9 million or $8.80 per share for the same nine-month period in fiscal year 1998.  The calculated loss per share amounts are based on basic shares of 6.9 million and 1.8 million for the nine-month periods ended June 30, 1999 and June 30, 1998, respectively.

"We exceeded revenue expectations for the quarter while keeping costs in check, and exceeded our operating margin expectations," said Samir Arora, NetObjects president and chief executive officer.  "We were particularly pleased with growth in Software License Fees, which increased 37 percent over the same period last year.  We believe that this growth reflects NetObjects' increasing role as a worldwide provider of e-business solutions, and our growing presence in large enterprise accounts.  

"International license fee and professional service revenue for the third quarter increased 96 percent compared to the same quarter last year.  This strong growth reflects the global appeal of our products and the Company's continued focus on expansion into international markets.  NetObjects recently announced the opening of a new office in Germany, which will serve the newly established Central Europe region.  Additionally, during the quarter the Company closed license contracts with three of Germany's leading Internet Service Providers (ISPs) to bundle NetObjects Fusion, demonstrating our presence in the European marketplace."

Arora continued, "During the third quarter we signed 235 contracts with new enterprise customers, bringing our total enterprise customer base to over 700.  NetObjects Authoring Server Suite drove a substantial component of this business, as our customers increasingly benefit from its collaborative approach to building corporate intranets.   New customers include well-known companies in banking, consumer electronics, education, health care, retailing and semiconductors.

"We reached a milestone in the third quarter with the sale of the 500,000th copy of NetObjects Fusion, underscoring the Company's position as a leader in e-business site building software.”  Users of NetObjects Fusion have access to an online community of shared ideas, technical support and complementary partner products to support their business goals.  In total, NetObjects' aggregate offering of products and services allow any company, no matter its size, to join the expanding e-business revolution.

NetObjects raised $67 million during its initial public offering of 6,000,000 shares on May 7, 1999, led by underwriters Deutsche Bank/BT Alex. Brown, BancBoston Robertson Stephens and U.S. Bancorp Piper Jaffray. "NetObjects’ completion of its initial public offering has allowed us to pay down debt and build cash reserves of $39.0 million to fund future growth.  We thank our employees for their significant contributions to this challenging process, and welcome new shareholders on board as we execute our plans as a public company, " Arora concluded.

QUARTERLY HIGHLIGHTS

Partnership Activities
NetObjects announced new products and/or marketing relationships with key partners during the quarter including IBM, Lotus Development Corp. (a subsidiary of IBM Corp.), IKON Office Solutions, Novell and Sun Microsystems, Inc.   These included:

The commercial availability of NetObjects Authoring Server Suite for IBM WebSphere, allowing enterprise customers to accelerate their e-business initiatives;

A new agreement with Lotus for Lotus Domino Application Studio – an end-to-end solution for e-business site development and management – to bundle NetObjects Fusion Enterprise Edition;

An agreement with Lotus Development Corp. (Lotus) to integrate an optimized version of Lotus FastSite in the new NetObjects Authoring Server Connector for Business Documents, simplifying the collaborative building of corporate intranets and enterprise portals;

An agreement whereby NetObjects' Professional Services division will work in association with Lotus and the Technology Services division of IKON Office Solutions to deliver custom intranet solutions and consulting services based on NetObjects and Lotus products;

An agreement to bundle NetObjects Fusion with the Novell's Small Business Suite 5, enhancing the suite as a platform for small businesses to deploy their Internet and intranet web sites, and;

A joint agreement with Sun Microsystems, Inc. to bring the next generation of NetObjects Authoring Server Suite to the Solaris operating environment, enabling enterprise customers to create advanced intranet portals and corporate e-business sites.

Awards and Recognition
The Company continues to receive recognition for its products and performance.  NetObjects was selected for the 1999 Softletter 100 and ranked in the Top 10 for one-year revenue growth.  Softletter 100, published annually, is a ranking of the computer software industry's 100 top independent software companies.  The Company was ranked 60th in total revenue in a list that included leading software companies such as Intuit, Microsoft and Novell. 

In addition, NetObjects Authoring Server Suite 3.0 received Internet World magazine's prestigious Industry Award at Spring Internet World '99, the West Coast's largest Internet industry conference and exhibition.  The Internet World Industry Awards program recognized Internet innovators and breakthrough products for 1998.

NetObjects products have won several other awards including InfoWorld's Analyst Choice award, CNET's Internet Excellence award, and PC Magazine's Editors Choice award.

About NetObjects
NetObjects, Inc. (NASDAQ:NETO), majority owned by IBM (NYSE:IBM), is a leading provider of e-business software and services that enable small businesses as well as large-scale enterprises to build, deploy and maintain Web sites on the Internet and corporate intranets.  The NetObjects product family includes NetObjects Fusion and NetObjects Authoring Server Suite.  In addition, NetObjects offers its customers on-line solutions, including content, products and services to help them register, host, build, maintain and promote their Web sites.

NetObjects has been ranked by Softletter 100, NewMedia 500 and as one of Fortune's 25 Very Cool Companies.  Its products have won over 50 awards including InfoWorld's Analyst Choice award, CNET's Internet Excellence award, PC Magazine's Editors Choice award and InternetWorld's Industry Award.  More information about NetObjects and its products can be found at www.netobjects.com.

Statements in this press release that are not strictly historical are forward looking statements as defined by Section 21E of the Securities Exchange Act of 1934.  This includes statements with regard to the Company's planned activities and expectations of future performance.  Forward looking statements include statements regarding product leadership, market opportunity and success in attracting new customers and partners.  All forward looking statements contained in this release are based upon information currently available to the Company, and the Company assumes no obligation to update any forward looking statements.  Forward looking statements are based on expectations of future events, and as such are subject to risk factors which could cause actual results to differ materially from expectations.  For a complete discussion of these risk factors, please refer to the Company's Form S-1A registration statement filed May 7, 1999 with the Securities and Exchange Commission.

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