PEGASYSTEMS INC.
                      Consolidated Statements of Income
                   (In thousands, except per share amounts)
                                   9/30/98

                             Three              Nine          Three     Nine
                             months            months         months   months
                             ended             ended          ended    ended
                            9/30/98           9/30/98        9/30/97  9/30/97
                        As announced*       As announced*
                                 (Revised)         (Revised)
    Revenue
      Software license    $14,828 $9,059 $40,750   $27,224    $5,090  $12,601
      Services            11,851  8,572   27,436    22,799     3,578    9,297
         Total revenue    26,679  17,631  68,186    50,023     8,668   21,898
    Cost of revenue
      Cost of software
       license              116    116       997       997        86      106
      Cost of services    6,125  6,465    15,502    15,995     2,829    7,365
         Total cost of
          revenue          6,241   6,581   16,499   16,992     2,915    7,471
    Gross Profit          20,438  11,050   51,687   33,031     5,753   14,427
    Operating expenses
      Research and
       development          6,335   6,335 16,856    16,856     4,261   10,100
      Selling and
       marketing            6,268   6,268 17,380    17,380     4,782   11,878
      General and
       administrative       1,159   1,829  3,645     4,315       721    1,967
         Total operating
          expenses         13,762  14,432 37,881    38,551     9,764   23,945
    Income (loss) from
     operations             6,676  (3,382)13,806   (5,520)   (4,011)  (9,518)
    License interest
     income                  704      704  1,857     1,857       476    1,271
    Other income             718      718  1,945     1,945       922    2,670
    Income (loss) before
     provision for
     income taxes           8,098  (1,960)17,608   (1,718)   (2,613)  (5,577)
    Provision (benefit)
     for income taxes      3,077    (745)  6,691     (653)     (993)  (2,119)
    Net income (loss)     $5,021 $(1,215)$10,917  $(1,065)  $(1,620) $(3,458)
    Earnings (loss)
     per share
      Basic                $0.18  $(0.04)  $0.38   $(0.04)   $(0.06)  $(0.12)
      Diluted              $0.17  $(0.04)  $0.37   $(0.04)   $(0.06)  $(0.12)
    Weighted average
     number of common
     shares outstanding
      Basic               28,628  28,628  28,576    28,576    28,520   28,264
      Diluted             29,997  29,997  29,813    29,813    28,520   28,264

    *As announced 10/29/98.