Press Release - inference

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Inference Corporation Announces Third Quarter Results, Management Changes Including Departure of CFO

Results Include Investment in Major Products for E-Business Sales and Support

Inference Corporation (NASDAQ: INFR) reported that total revenues for the third quarter ended October 31, 1999 were $5.5 million, a 34% decrease from revenues of $8.3 million during the same quarter last year. Loss from operations for the quarter was $4.2 million, compared to operating income of $200,000 in the same quarter last year. The net loss for the quarter amounted to $3.9 million, or 52 cents per share, as compared to net income of $400,000, or six cents per share, a year ago.

"Our third quarter results continue to reflect the revenue shortfall experienced in the first two quarters of the year, as well as increased investments in product development, sales and marketing. These investments have resulted in the introduction of two new web-architected products: k-Commerce(TM) Support Enterprise and k-Commerce(TM) Sales," said Charles Jepson, president and chief executive officer.

"With the current release of k-Commerce Support Enterprise and the release of k-Commerce Sales in July, we now have a suite of complimentary products that solidifies our position as a leading provider of personalized one-to-one sales, service and support products for the Web. k-Commerce Support Enterprise is currently available via a hosted service through which Inference builds, manages and hosts an Internet-based self-service solution to address our customer's specific Customer Relationship Management (CRM) needs. The Windows NT version is targeted for release later this year. Momentum is also building for k-Commerce Sales as evidenced by multiple pilot projects that will be announced in the coming quarter," continued Jepson.

"To best capitalize on the opportunities presented by our new offerings, we have refocused and realigned our resources into two separate product divisions. Ralph Barletta, former senior vice president of research and development, has been promoted to senior vice president and general manager of the k-Commerce Support Enterprise Division while Bob Tatemichi continues his responsibilities as vice president and general manager of the k-Commerce Sales Division," concluded Jepson.

In other management moves, Nigel Doust has been named vice president of international operations. Nobby Akiha will resume responsibilities as vice president of marketing and business development. The responsibilities of Greg Pappas, vice president of human resources, have been expanded to cover all administrative functions.

Mark A. Wolf, chief financial officer, and Steven Gal, vice president of marketing will be leaving the Company effective December 3, 1999. The Company will begin a search for a CFO immediately.

Additional Financial Detail

-- Product revenues for the third quarter were $2.3 million, a decrease of 53% as compared to $4.9 million during the same quarter last year.

-- Service revenues were $3.2 million, a decrease of six percent from $3.4 million in the same period last year.

-- Revenues from Americas operations were $3.2 million, a 29% decrease from $4.5 million during the same quarter last year.

-- International revenues for the quarter were $2.3 million, a 39% decrease from $3.8 million a year earlier.

-- Product revenues from Americas operations were $1.3 million, a decrease from $2.6 million for the same period last year.

-- International product revenues were $1.0 million, down from $2.3 million in the third quarter of fiscal 1999.

About Inference Corporation
Inference Corporation (NASDAQ: INFR) is a leading provider of software and services for customer relationship management and e-business. Inference's k-Commerce product family leverages a company's knowledge, integrating personalized, one-to-one sales, service and support across the Web and Contact Center. Inference helps companies raise customer care to the next level while taking e-Commerce beyond the transaction.

Headquartered in the San Francisco Bay Area, with international headquarters near London, England, Inference supports its customers from offices throughout North America, Europe and Asia Pacific through a global professional services organization. For further information, contact Inference at 415-893-7200, send an e-mail to info@inference.com or visit www.inference.com.

In addition to historical information contained herein, this news release contains forward-looking statements that are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those expressed in or implied by such forward looking statements. Factors that could cause or contribute to differences in the final results include, but are not limited to, timeliness of new k-Commerce product releases including the Windows NT version of k-Commerce Support Enterprise, fluctuations in quarterly operating results, the size and timing of customer orders for product licenses, changes in the competitive marketplace, market acceptance and customer demand for k-Commerce product offerings, risks of entering markets in which the company has limited or no prior experience and the potential loss of key employees. Third quarter financial results are not an indication of future results. Further information on potential factors that may affect future results are discussed from time to time in the Company's public reports filed with the Securities and Exchange Commission, including, without limitation, the Company's Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, Current Reports on Form 8-K and Registration Statement on Form S-3.


                         INFERENCE CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS
      (Amounts in thousands, except net income (loss) per share)
                              (unaudited)

                               Three months ended   Nine months ended
                                    October 31,        October 31,
                               ------------------ ------------------
                                  1999      1998     1999      1998
                               ------------------ ------------------

Revenues:
   Products                    $  2,294  $  4,912 $  7,503  $ 12,105
   Services                       3,220     3,412    9,911    10,080
Total revenues                    5,514     8,324   17,414    22,185

Operating costs and expenses:
 Cost of revenues - products        339       233      744       611
 Cost of revenues - services      1,533     1,615    4,915     5,177
 Product development              2,167     1,358    5,556     3,860
 Sales and marketing              4,546     3,807   12,008    11,278
 General and administrative       1,021       853    2,796     3,100
 Amortization of intangibles         61         0      122         0
 Acquisition related                  0         0      677         0
 Restructuring                        0       282        0     1,856
Total operating costs and
 expenses                         9,667     8,148   26,818    25,882
Income (loss) from operations    (4,153)      176   (9,404)   (3,697)
Interest income and other, net      205       337      718       953
 Income (loss) before income
  taxes                          (3,948)      513   (8,686)   (2,744)
 Provision for income taxes           0       100        0       100
 Net income (loss)             ($ 3,948) $    413 ($ 8,686) ($ 2,844)

 Net income (loss) per share:
 Basic and diluted             ($  0.52) $   0.06 ($  1.18) ($  0.39)

Shares used in computing net
 income (loss) per share:
 Basic                            7,598     6,992    7,370     7,224
 Diluted                          7,598     7,083    7,370     7,224


                        INFERENCE CORPORATION
                      CONSOLIDATED BALANCE SHEETS
                        (Amounts in thousands)
                             (unaudited)

                                 October 31,      January 31,
                                     1999             1999
 ASSETS

 Current assets:

 Cash and cash equivalents              $ 18,813    $ 25,761
 Accounts receivable, net                  4,945       7,063
 Other current assets                        836         433
        Total current assets              24,594      33,257

 Property and equipment, net               1,810       1,607

 Intangible assets                           945           0
 Other assets                                515         511
                                        $ 27,864    $ 35,375

 LIABILITIES AND
 SHAREHOLDERS' EQUITY

 Current liabilities:

Accounts payable                        $    607    $    819
Accrued salaries and related
  items                                    2,295       2,371
Other accrued liabilities                  2,218       2,785
Deferred revenue                           4,553       4,642
Total current liabilities                  9,673      10,617

 Shareholders' equity:
 Common stock                                 76          70
 Additional paid-in capital               48,478      46,328
 Accumulated deficit                     (29,998)    (21,312)
 Accumulated other comprehensive loss       (365)       (328)
       Total shareholders' equity         18,191      24,758
                                        $ 27,864    $ 35,375

Editorial Contact:
Mark Wolf
Inference Corporation
415/893-7275

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