Tecnomatix Announces Third Quarter 1998Results.

HERZLIYA, Israel--(BUSINESS WIRE)--Oct. 26, 1998--TECNOMATIX TECHNOLOGIES LTD. (NASDAQ- NM Symbol: TCNOF) today announced unaudited financial results for the third quarter and nine months ended September 30, 1998.

Revenues for the three months ended September 30, 1998, increased by 18%

to $17,505,000 compared to $14,789,000 for the same period in 1997. Gross profit increased by 14% to $15,083,000 compared to $13,222,000 for the third quarter of 1997. Income before extraordinary item for the third quarter decreased by 21% to $2,657,000, or $0.27 per share (diluted), compared to $3,362,000, or $0.31 per share (diluted), for the three months ended September 30, 1997. During the third quarter ended September 30, 1998, the Company recorded an extraordinary gain of $7,957,000 or $0.80 per share (diluted), related to the repurchase of 25% of the Company's Convertible Notes. Net income after extraordinary item, for the third quarter of 1998 was $10,614,000, or $1.07 per share (diluted).

Revenues for the nine months ended September 30, 1998 increased by 18% to $48,492,000 compared to $41,005,000 for the same period in 1997. Gross profit increased by 15% to $41,962,000 compared to $36,368,000 for the nine months ended September 30, 1997. Income before extraordinary item for the nine months ended September 30, 1998 decreased by 18% to $6,886,000, or $0.66 per share (diluted), compared to $8,349,000, or $0.78 per share (diluted) for the same period in 1997. Net income after extraordinary item for the nine months ended September 30, 1998 was $14,843,000 or $1.42 per share (diluted).

Harel Beit-On, President and CEO commented, "We are pleased with our performance this quarter. During the quarter we continued to demonstrate impressive growth in tactical sales and achieved strategic progress with significant commitments and initial revenues for our new Enterprise Manufacturing Solution.

"During the quarter, we were also able to substantially improve our financial position by repurchasing 25% of our outstanding Convertible Notes at attractive prices, resulting in significant extraordinary income."

Mr. Beit-On continued, "After successful pilot installation at a major automotive company, we received significant customer commitments for our new Enterprise Manufacturing Solution. We believe these new products, as part of our expanded Digital Factory vision, further enhance our leadership position and redefine the scope of our market.

"We are especially pleased, in meeting our financial goals this quarter with the strength of successful tactical sales into a growing number of industries.

"During this quarter, we continued to build an impressive customer base in the heavy machinery, consumer electronics and automotive supplier industries with the addition of numerous new customers including DAF Trucks, Daewoo Heavy Industries, Ericsson, Krupp and Nokia.

"Sales force productivity remains a focus area, especially in the U.S. As previously announced, we are pleased with the addition of Sam Mancuso as Executive Vice-President Sales & Field Operations. We are confident that Sam's extensive experience in building large successful sales operations will have an invaluable contribution in taking Tecnomatix to the next stage of growth."

To conclude, Beit-On said, "We continuously seek ways to enhance our shareholder value, in addition to the repurchase of the Convertible Notes, the Company has repurchased 650,000 shares of the 850,000 share buy-back program approved by the Board."

TECNOMATIX TECHNOLOGIES LTD. is a pioneer and world leader of the computer-aided production engineering (CAPE) market. The Company develops, markets and supports software tools to fully computerize the industrial process and achieve a seamless transition from design to production. CAPE products enable production engineers to create an on-screen virtual manufacturing environment that graphically displays and simulates actual manufacturing operations. The Company's CAPE products include the ROBCAD line of products for manufacturing processes; the VALISYS line of quality engineering products; DYNAMO for the study of assembly and disassembly of newly designed products; SIMPLE++ for design, planning, and optimization of a complete factory; EXALINE for printed circuit board (PCB) assembly machines; and PART for generative machining and process planning.

Certain statements made herein that use the words "estimate" "project" "intend" "expect" "believe" and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements involve known and unknown risks and uncertainties which could cause the actual results, performance or achievements of the Company to be materially different from those which may be expressed or implied by such statements, including, among others, changes in general economic and business conditions and specifically, changes in the level of activity in the automotive industry, decline in demand to the Company's products, inability to timely develop and introduce new technologies, products and applications and loss of market share and pressure on prices resulting from competition. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission. Note: All brand, product and company names are trademarks of their respective owners. -0-

TECNOMATIX TECHNOLOGIES

Condensed Balance Sheets
U.S $ in thousands
                                         9/30/98        12/31/97
                                     -------------------------------
                                        (Unaudited)     (Audited)
Current Assets:
  Cash and cash equivalents                    11,063        11,326
  Short-term investments                       78,323        75,125
Receivables:
    Trade                                      22,342        20,960
    Related parties                               391           511
    Other and prepaid expenses                  7,375         6,937
                                     -------------------------------

Total current Assets                          119,494       114,859
                                     -------------------------------

Non-Current receivables                           620           327
                                     -------------------------------

Long-term investments                          33,000        61,000
                                     -------------------------------

Property and Equipment, net                     7,617         7,030
                                     -------------------------------

Other Assets, net                              13,132        13,005
                                     -------------------------------

Total assets                                  173,863       196,221
                                     ===============================

Current Liabilities:
  Short-term credits                              662             -

  Payables:
     Trade                                      1,371         2,738
     Other and accrued expenses                14,981        17,213
                                     -------------------------------

Total current liabilities                      17,014        19,951
                                     -------------------------------

Long-term liabilities                           1,460         1,339
                                     -------------------------------

5.25% Convertible subordinated notes           73,250        97,750
                                     -------------------------------

Minority interest in consolidated
 subsidiary company                               245           243
                                     -------------------------------

Shareholders' Equity                           81,894        76,938
                                     -------------------------------

Total liabilities and shareholders'
 equity                                       173,863       196,221
                                     ===============================


TECNOMATIX TECHNOLOGIES

CONSOLIDATED STATEMENT OF OPERATIONS
1998 vs. 1997
(000 US$)
---------
Condensed Statements of Operations
U.S $ in thousands, except per share data

                                Nine months ended   Three months ended
                                9/30/98   9/30/97  9/30/98     9/30/97
                                    (Unaudited)        (Unaudited)

Revenues
 Software and systems sales     31,406     29,322    11,504     10,249
 Maintenance and
  engineering services          17,086     11,683     6,001      4,540
                            ------------------------------------------
Total revenues                  48,492     41,005    17,505     14,789
                            ------------------------------------------
Cost of revenues
 Software and systems            2,481      2,722       932        844
 Maintenance and
  engineering services           4,049      1,915     1,490        723
                            ------------------------------------------
Total cost of revenues           6,530      4,637     2,422      1,567
                            -------------------------------------------
Gross profit                    41,962     36,368    15,083     13,222
Research & development
 costs, net                      9,409      7,482     3,271      2,444
Selling expenses, net           24,212     18,726     8,666      6,776
General and
 administrative expenses         3,756      3,025     1,421      1,109
                            ------------------------------------------
Operating profit                 4,585      7,135     1,725      2,893
Financial income, net            2,675      2,470       874        936
                            ------------------------------------------
Income before taxes
 on income                       7,260      9,605     2,599      3,829
Provision for income
 taxes                            (372)    (1,120)        -       (441)
                            ------------------------------------------
Income after taxes
 on income                       6,888      8,485     2,599      3,388
Minority interest
 in net income of
 consolidated subsidiaries          (2)      (136)       58        (26)
                            ------------------------------------------
Income before
 Extraordinary Item              6,886      8,349     2,657      3,362
Extraordinary Item               7,957          -     7,957          -
                            ------------------------------------------
Net Income                      14,843      8,349    10,614      3,362
                            ==========================================
Basic earnings per share:
Income before
 Extraordinary Item               0.69       0.85      0.27       0.34
Extraordinary Item                0.80          -      0.82          -
                            ------------------------------------------
Net Income                        1.49       0.85      1.09       0.34
                            ==========================================
Diluted earnings per share:
Income before
 Extraordinary Item               0.66       0.78      0.27       0.31
Extraordinary Item                0.76          -      0.80          -
                            ------------------------------------------
Net Income                        1.42       0.78      1.07       0.31
                            ==========================================
Weighted average number
 of shares outstanding:
Basic                        9,909,204  9,860,200 9,671,303  9,938,250
                            ==========================================
Diluted                     10,422,885 10,701,171 9,918,345 10,843,775
                            ==========================================
Ratio of earnings
 to fixed charges                    3         13         3          6