Intergraph Corp – ‘10-Q’ for 6/30/00

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Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      36±   165K 
 2: EX-27       Financial Data Schedule (Pre-XBRL)                     2±     8K 

10-Q   —   Quarterly Report
Document Table of Contents

==================================================================              
UNITED STATES               
SECURITIES AND EXCHANGE COMMISSION                
Washington, D.C. 20549                

FORM 10-Q               

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)                
OF THE SECURITIES EXCHANGE ACT OF 1934                

For the quarterly period ended June 30, 2000                

OR                

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)               
OF THE SECURITIES EXCHANGE ACT OF 1934                

For the transition period from____to____                  

Commission file number 0-9722               

INTERGRAPH CORPORATION              
------------------------------------------------------                
(Exact name of registrant as specified in its charter)                

Delaware                                 63-0573222       
-------------------------------                -------------------              
(State or other jurisdiction of                 (I.R.S. Employer                
incorporation or organization)                 Identification No.)              

Intergraph Corporation                                          
Huntsville, Alabama                         35894-0001      
----------------------------------------              ----------                
(Address of principal executive offices)              (Zip Code)                

(256) 730-2000            
------------------            
(Telephone Number)            

Indicate  by check mark whether the registrant (1) has filed  all               
reports  required  to be filed by Section  13  or  15(d)  of  the               
Securities  Exchange Act of 1934 during the preceding  12  months               
(or  for such shorter period that the registrant was required  to               
file  such  reports),  and (2) has been subject  to  such  filing               
requirements for the past 90 days.   YES X  NO___                               

Common stock, par value  $.10 per share: 49,380,467 shares                
outstanding as of June 30, 2000               

==================================================================              

INTERGRAPH CORPORATION                
FORM 10-Q*                
June 30, 2000               

INDEX               

                                            Page No.
                                            --------

PART I.  FINANCIAL INFORMATION                                                  
---------------------                                         

Item 1. Financial Statements                                              

Consolidated Balance Sheets at June 30,                   
2000 and December 31, 1999                     2    

Consolidated Statements of Operations                     
for the quarters and six months                     
ended June 30, 2000 and 1999                   3    

Consolidated Statements of Cash Flows                     
for the six months ended June 30,                   
2000 and 1999                                  4    

Notes to Consolidated Financial Statements      5 - 13    

Item 2. Management's Discussion and Analysis                              
of Financial Condition and Results of                     
Operations                                     14 - 25    

Item 3. Quantitative and Qualitative Disclosures                          
About Market Risk                                26       

PART II. OTHER INFORMATION                                                      
-----------------                                             

Item 1. Legal Proceedings                                26               

Item 4. Submission of Matters to a Vote of                                
Security Holders                                 27       

Item 6. Exhibits and Reports on Form 8-K                 27               

SIGNATURES                                                  28                  

*Information contained in this Form 10-Q includes statements that               
are forward looking as defined in Section 21E of the Securities                 
Exchange Act of 1934.  Actual results may differ materially from                
those projected in the forward looking statements.  Information                 
concerning factors that could cause actual results to differ                    
materially from those in the forward looking statements is                      
described in the Company's filings with the Securities and                      
Exchange Commission, including its most recent Annual Report on                 
Form 10-K, its Form 10-Q for the quarter ended March 31, 2000,                  
and this Form 10-Q.                                                             

PART I.  FINANCIAL INFORMATION                                                  
---------------------                                         

INTERGRAPH CORPORATION AND SUBSIDIARIES               
CONSOLIDATED BALANCE SHEETS               
(Unaudited)               

--------------------------------------------------------------------            
                           June 30,       December 31,
                         2000             1999
--------------------------------------------------------------------            
(In thousands except share and per share amounts)                               

Assets                                                                          
Cash and cash equivalents             $ 92,544         $ 88,513             
Accounts receivable, net               217,675          258,768             
Inventories                             31,429           35,918             
Other current assets                    27,776           28,744             
--------------------------------------------------------------------            
Total current assets               369,424          411,943         

Investments in affiliates                9,593            9,940             
Other assets                            64,709           68,154             
Property, plant, and equipment, net     71,898           94,907             
--------------------------------------------------------------------            
Total Assets                      $515,624         $584,944         
====================================================================            

Liabilities and Shareholders' Equity                                            
Trade accounts payable                $ 36,195         $ 50,963             
Accrued compensation                    35,425           35,848             
Other accrued expenses                  55,599           71,052             
Billings in excess of sales             53,928           66,051             
Income taxes payable                     8,164            8,175             
Short-term debt and current                                                 
maturites of long-term debt           7,643           11,547          
--------------------------------------------------------------------            
Total current liabilities          196,954          243,636         

Deferred income taxes                    2,304            2,620             
Long-term debt                          33,066           51,379             
Other noncurrent liabilities            10,766           10,609             
--------------------------------------------------------------------            
Total liabilities                  243,090          308,244         
--------------------------------------------------------------------            

Shareholders' equity:                                                       
Common stock, par value $.10                                              
per share - 100,000,000 shares                                        
authorized; 57,361,362 shares                                         
issued                                5,736            5,736          
Additional paid-in capital            215,428          216,943            
Retained earnings                     175,594          178,231            
Accumulated other comprehensive                                           
income                               (7,920)          (5,506)         
--------------------------------------------------------------------            
                          388,838          395,404
Less - cost of 7,980,895 treasury                                         
shares at June 30, 2000 and                                           
8,145,149 treasury shares at                                          
December 31, 1999                  (116,304)        (118,704)         
--------------------------------------------------------------------            
Total shareholders' equity         272,534          276,700         
--------------------------------------------------------------------            
Total Liabilities and                                               
Shareholders' Equity            $515,624         $584,944       
====================================================================            

The accompanying notes are an integral part of these consolidated               
financial statements.                                                           

INTERGRAPH CORPORATION AND SUBSIDIARIES               
CONSOLIDATED STATEMENTS OF OPERATIONS               
(Unaudited)               

--------------------------------------------------------------------------      
                   Quarter Ended June 30,  Six Months Ended June 30,
                       2000      1999            2000       1999
--------------------------------------------------------------------------      
(In thousands except per share amounts)                                         

Revenues                                                                        
Systems                    $123,242  $154,521        $257,580   $321,900      
Maintenance                  41,505    45,608          83,813     95,276      
Services                     23,234    26,947          45,993     54,510      
--------------------------------------------------------------------------      
Total revenues            187,981   227,076         387,386    471,686    
--------------------------------------------------------------------------      

Cost of revenues                                                                
Systems                      76,456   107,373         162,547    226,295      
Maintenance                  22,493    22,402          45,090     48,437      
Services                     20,025    21,881          38,514     42,608      
--------------------------------------------------------------------------      
Total cost of revenues    118,974   151,656         246,151    317,340    
--------------------------------------------------------------------------      

Gross profit               69,007    75,420         141,235    154,346    

Product development           16,002    15,790          29,963     31,343       
Sales and marketing           31,866    45,412          64,803     89,400       
General and administrative    23,867    28,987          48,839     54,377       
Nonrecurring operating                                                          
charges                       ---     2,472             ---      2,472    
--------------------------------------------------------------------------      

Loss from operations       (2,728)  (17,241)         (2,370)   (23,246)   

Gain on sale of assets           ---    11,505             ---     11,505       
Arbitration settlement           ---       ---             ---    ( 8,562)      
Interest expense              (1,112)  ( 1,423)         (2,288)   ( 2,839)      
Other income (expense) - net   2,678   ( 2,489)          5,921    ( 1,981)      
--------------------------------------------------------------------------      

Income (loss) from                                                        
continuing operations                                                     
before income taxes        (1,162)  ( 9,648)          1,263    (25,123)   

Income tax expense             2,500       ---           3,900        ---       
--------------------------------------------------------------------------      

Loss from continuing                                                      
operations                 (3,662)  ( 9,648)         (2,637)   (25,123)   

Loss from discontinued                                                          
operation, net of                                                         
income taxes                  ---   ( 2,444)            ---    ( 4,527)   
--------------------------------------------------------------------------      

Net loss                 $ (3,662) $(12,092)       $ (2,637)  $(29,650)   
==========================================================================      

Loss per share - basic                                                    
and diluted:                                                            
Continuing operations  $ (  .07) $(   .20)       $ (  .05)  $(   .52) 
Discontinued operation      ---   (   .05)            ---    (   .09) 
--------------------------------------------------------------------------      
    Net loss          $ (  .07) $(   .25)       $ (  .05)  $(   .61)
==========================================================================      

Weighted average shares                                                         
outstanding -                                                             
basic and diluted        49,330    48,831          49,292     48,765  
==========================================================================      

The accompanying notes are an integral part of these consolidated               
financial statements.                                                           

INTERGRAPH CORPORATION AND SUBSIDIARIES               
CONSOLIDATED STATEMENTS OF CASH FLOWS               
(Unaudited)               

---------------------------------------------------------------------           
Six Months Ended June 30,                       2000          1999              
---------------------------------------------------------------------           
(In thousands)                                                                  

Cash Provided By (Used For):                                                    
Operating Activities:                                                           
Net loss                                   $( 2,637)     $(29,650)          
Adjustments to reconcile net loss to net                                    
cash provided by (used for) operating                                       
activities:                                                                 
Gain on sale of subsidiary                     ---       (11,505)         
Gains on sales of capital assets           ( 7,181)      ( 1,392)         
Depreciation                                 8,083        10,778          
Amortization                                11,079        13,162          
Noncash portion of arbitration settlement      ---         3,530          
Noncash portion of nonrecurring operating                                 
charges                                      ---         2,472        
Net changes in current assets and                                         
liabilities                                7,688         8,504        
---------------------------------------------------------------------           
Net cash provided by (used for) operating                                 
activities                                17,032       ( 4,101)       
---------------------------------------------------------------------           

Investing Activities:                                                           
Net proceeds from sales of assets            16,667        24,631           
Purchases of property, plant, and equipment ( 4,171)      ( 5,723)          
Capitalized software development costs      ( 8,520)      ( 9,627)          
Capitalized internal use software costs     (   760)      ( 2,967)          
Business acquisition, net of cash acquired  ( 1,051)      ( 1,874)          
Other                                       (   229)      ( 1,959)          
---------------------------------------------------------------------           
Net cash provided by investing activities    1,936         2,481          
---------------------------------------------------------------------           

Financing Activities:                                                           
Gross borrowings                                ---            45           
Debt repayment                              (13,016)      (17,897)          
Proceeds of employee stock purchases and                                    
exercise of stock options                     885         1,361         
---------------------------------------------------------------------           
Net cash used for financing activities     (12,131)      (16,491)         
---------------------------------------------------------------------           
Effect of exchange rate changes on cash       ( 2,806)      ( 2,118)            
---------------------------------------------------------------------           
Net increase (decrease) in cash and cash                                        
equivalents                                   4,031       (20,229)          
Cash and cash equivalents at beginning                                          
of period                                    88,513        95,473           
---------------------------------------------------------------------           
Cash and cash equivalents at end of period   $ 92,544      $ 75,244             
=====================================================================           

The accompanying notes are an integral part of these consolidated               
financial statements.                                                           

INTERGRAPH CORPORATION AND SUBSIDIARIES               
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                

NOTE 1:  In  the  opinion of management, the accompanying unaudited             
consolidated financial statements contain all  adjustments    
(consisting  of  normal recurring items) necessary  for  a    
fair  presentation  of  results for  the  interim  periods    
presented.                                                    

Certain   reclassifications  have   been   made   to   the    
previously  reported consolidated statements of operations    
and  cash flows for the quarter and six months ended  June    
30,  1999 to provide comparability with the current period    
presentation.                                                 

NOTE 2:  Discontinued Operation.  On October 31, 1999, the  Company             
sold  its  VeriBest, Inc. operating segment.  Accordingly,    
the  Company's  consolidated statements of operations  for    
the  quarter  and six months ended June 30, 1999 have been    
restated  to reflect VeriBest's business as a discontinued    
operation.   The  discontinued  operation  has  not   been    
presented  separately  in  the consolidated  statement  of    
cash  flows for the six months ended June 30, 1999.  Other    
than  its operating losses for the periods presented,  the    
discontinued  operation did not have a significant  impact    
on  the  Company's  consolidated cash  flow  or  financial    
position.                                                     

For  the quarter ended June 30, 1999, VeriBest incurred  a    
net  loss  of $2,444,000, including a loss from operations    
of  $2,232,000, on revenues from unaffiliated customers of    
$6,568,000.    For  the six months ended  June  30,  1999,    
VeriBest  incurred a net loss of $4,527,000,  including  a    
loss  from  operations  of $4,130,000,  on  revenues  from    
unaffiliated customers of $14,035,000.                        

NOTE 3:  Litigation.  As further described in the Company's  Annual             
Report  on Form 10-K for its year ended December 31,  1999    
and  its  Form 10-Q for the quarter ended March 31,  2000,    
the  Company has extensive ongoing litigation  with  Intel    
Corporation.  See Management's Discussion and Analysis  of    
Financial  Condition  and Results of  Operations  in  this    
Form  10-Q for a discussion of developments during  second    
quarter 2000.                                                 

NOTE 4:  Arbitration Settlement.  The Company maintains an equity               
ownership   position  in  Bentley  Systems,   Incorporated    
("BSI"),  the  developer  and  owner  of  MicroStation,  a    
software   product  utilized  in  many  of  the  Company's    
software applications and for which the Company serves  as    
a  nonexclusive distributor.  In March 1996, BSI commenced    
arbitration   against  the  Company  with   the   American    
Arbitration  Association, Atlanta,  Georgia,  relating  to    
the  respective rights of the companies under their  April    
1987   Software  License  Agreement  and  other   matters,    
including  the Company's alleged failure to  properly  pay    
to  BSI  certain  royalties on its sales of  BSI  software    
products,  and seeking significant damages.  On March  26,    
1999,  the Company and BSI executed a Settlement Agreement    
and  Mutual  General Release ("the Agreement")  to  settle    
this  arbitration and mutually release all claims  related    
to  the  arbitration  or  otherwise,  except  for  certain    
litigation  between the companies that was the subject  of    
a  separate settlement agreement and payment for  products    
and services obtained or provided in the normal course  of    
business since January 1, 1999.  Both the Company and  BSI    
expressly  denied  any  fault,  liability,  or  wrongdoing    
concerning the claims that were the subject matter of  the    
arbitration   and  settled  solely  to  avoid   continuing    
litigation with each other.                                   

Under the terms of the Agreement, the Company on April  1,    
1999  made  payment to BSI of $12,000,000 and  transferred    
to  BSI ownership of three million of the shares of  BSI's    
Class   A   common  stock  owned  by  the  Company.    The    
transferred    shares   were   valued   at   approximately    
$3,500,000  on  the Company's books. As a  result  of  the    
settlement,  Intergraph's  equity  ownership  in  BSI  was    
reduced  from  approximately  50%  to  approximately  33%.    
Additionally, the Company had a $1,200,000 net  receivable    
from  BSI relating to business conducted prior to  January    
1,  1999  which  was  written off in connection  with  the    
settlement.                                                   

In  first quarter 1999, the Company accrued a nonoperating    
charge  to  earnings  of $8,562,000 ($.18  per  share)  in    
connection  with the settlement, representing the  portion    
of  settlement costs not previously accrued.  This  charge    
is   included   in   "Arbitration   settlement"   in   the    
consolidated  statement of operations for the  six  months    
ended June 30, 1999.                                          

The  $12,000,000 payment to BSI was funded primarily  from    
existing  cash balances.  For further discussion regarding    
the  Company's liquidity, see Management's Discussion  and    
Analysis  of Financial Condition and Results of Operations    
in this Form 10-Q.                                            

NOTE 5:  Inventories  are  stated at the lower of average  cost  or             
market and are summarized as follows:                         

----------------------------------------------------------    
             June 30,       December 31,
            2000              1999
----------------------------------------------------------    
(In thousands)                                                

Raw materials            $ 9,985          $12,888             
Work-in-process            3,668            5,739             
Finished goods             7,619            5,895             
Service spares            10,157           11,396             
----------------------------------------------------------    
Totals                   $31,429          $35,918             
==========================================================    

The Company's December 31, 1999 raw materials and work-in-    
process  balances  have been restated to  reflect  certain    
parts as raw materials rather than work-in-process as  the    
Company  is  no  longer manufacturing or assembling  these    
products at its facilities.  Amounts reflected as work-in-    
process relate primarily to contracts accounted for  under    
the percentage-of-completion method.                          

NOTE 6:  Property,  plant, and equipment - net includes  allowances             
for  depreciation of $202,450,000 and $214,219,000 at June    
30, 2000 and December 31, 1999, respectively.                 

NOTE 7:  In  January  1999, the Company acquired  PID,  an  Israeli             
software   development  company,   for   $5,655,000.    At    
closing,  the  Company paid $2,180,000 in cash,  with  the    
remainder  due  in  varying installments through  February    
2002.  Installment payments totaling $1,051,000 were  made    
in  the  first  six  months of 2000 and  are  included  in    
"Business  acquisition,  net  of  cash  acquired"  in  the    
Company's  consolidated statement of cash  flows  for  the    
six  months ended June 30, 2000.  The accounts and results    
of  operations of PID have been combined with those of the    
Company  since the date of acquisition using the  purchase    
method  of  accounting.  This acquisition has  not  had  a    
material effect on the Company's results of operations.       

NOTE 8:  In  November 1998, the Company sold substantially  all  of             
its  U.S.  manufacturing assets to  SCI  Technology,  Inc.    
("SCI")  a  wholly-owned subsidiary of SCI Systems,  Inc.,    
and  SCI  assumed responsibility for the manufacturing  of    
substantially  all  of  the Company's  hardware  products.    
The  total purchase price was $62,404,000, $42,485,000  of    
which  was received during fourth quarter 1998.  The final    
purchase price installment of $19,919,000 was received  on    
January  12,  1999 and is included in "Net  proceeds  from    
sales  of  assets" in the Company's consolidated statement    
of  cash flows for the six months ended June 30, 1999.  As    
part  of this transaction, SCI retained the option to sell    
to  the Company any inventory included in the initial sale    
which  had not been utilized in the manufacture  and  sale    
of  finished  goods within six months of the date  of  the    
sale  (the  "unused inventory").  On June  30,  1999,  SCI    
exercised  this  option  and sold to  the  Company  unused    
inventory  having a value of approximately $10,200,000  in    
exchange for a cash payment of $2,000,000 on July 2,  1999    
and   a   short-term  installment  note  payable  in   the    
principal amount of $8,200,000.  This note was payable  in    
three monthly installments concluding October 1, 1999  and    
bore  interest  at a rate of 9%.  The Company  funded  its    
payments  to  SCI primarily with existing  cash  balances.    
For  further discussion regarding the Company's liquidity,    
see  Management's  Discussion and  Analysis  of  Financial    
Condition  and  Results of Operations in this  Form  10-Q.    
For  a complete discussion of the SCI transaction, see the    
Company's  Annual Report on Form 10-K for the  year  ended    
December 31, 1999.                                            

NOTE 9: Nonrecurring Operating Charges.  During 1998 and 1999,                
the  Company implemented various restructuring actions  in    
an effort to restore the Company to profitability.  For  a    
complete  discussion, see the Company's Annual  Report  on    
Form   10-K   for  the  year  ended  December  31,   1999.    
Restructuring  activity during the  first  six  months  of    
1999 and 2000 is discussed below.                             

In   second   quarter  1999,  in  response  to   continued    
operating  losses  in  its  Intergraph  Computer   Systems    
("ICS")  operating  segment,  the  Company  implemented  a    
resizing   of   its  European  computer   hardware   sales    
organization.  This resizing involved closing most of  the    
Company's  ICS  subsidiaries in Europe  and  consolidating    
the  European hardware sales effort within the  Intergraph    
subsidiaries  in  that  region.  The  associated  cost  of    
$2,500,000,  primarily  for  employee  severance  pay,  is    
included  in  "Nonrecurring  operating  charges"  in   the    
consolidated statements of operations for the quarter  and    
six   months  ended  June  30,  1999.   Approximately   46    
European  positions were eliminated, all in the sales  and    
marketing area.  The Company estimates that this  resizing    
has   resulted   in   annual  savings   of   approximately    
$3,000,000.                                                   

Cash  outlays for severance related to the 1998  and  1999    
actions approximated $3,500,000 and $900,000 in the  first    
six  months  of 2000 and 1999, respectively. At  June  30,    
2000,  the total remaining accrued liability for severance    
relating   to   the   1999   reductions   in   force   was    
approximately   $1,400,000   compared   to   approximately    
$5,000,000  at  December 31, 1999.  These liabilities  are    
reflected  in  "Other accrued expenses" in  the  Company's    
consolidated  balance  sheets.   The  related  costs   are    
expected to be paid over the remainder of 2000 and  relate    
primarily  to severance liabilities in European countries,    
where   typically   several  months   are   required   for    
settlement.                                                   

Severance payments to date have been funded from  existing    
cash   balances  and  from  proceeds  from  the  sale   of    
VeriBest.   For further discussion regarding the Company's    
liquidity,  see  Management's Discussion and  Analysis  of    
Financial  Condition  and Results of  Operations  in  this    
Form 10-Q.                                                    

NOTE 10: Supplementary cash flow information is summarized  as                  
follows:                                                      

Changes  in  current assets and liabilities,  net  of  the    
effects   of  business  acquisitions,  divestitures,   and    
nonrecurring  operating charges, in reconciling  net  loss    
to  net  cash  provided by (used for)  operations  are  as    
follows:                                                      

----------------------------------------------------------    
                          Cash Provided By
                         (Used For) Operations
Six Months Ended June 30,          2000          1999         
----------------------------------------------------------    
(In thousands)                                                

(Increase) decrease in:                                       
Accounts receivable, net       $35,732       $27,871      
Inventories                      4,232        (3,341)     
Other current assets             4,871        (2,320)     
Increase (decrease) in:                                       
Trade accounts payable         (14,321)       (2,303)     
Accrued  compensation and                                 
other accrued expenses        (12,715)       (3,123)    
Income taxes payable                85        (1,150)     
Billings in excess of sales    (10,196)       (7,130)     
----------------------------------------------------------    
Net changes in current assets                                 
and liabilities                 $ 7,688       $ 8,504       
==========================================================    

Investing and financing transactions in the first half  of    
2000  that  did not require cash included the  termination    
of  a  long-term lease on one of the Company's facilities.    
The  Company accounted for this lease as a financing,  and    
upon   termination,  long-term  debt  of  $8,300,000   and    
property, plant, and equipment of $6,500,000 were  removed    
from  the  Company's books.  Significant noncash investing    
and  financing  transactions in the  first  half  of  1999    
included the acquisition of a business in part for  future    
obligations  totaling approximately $3,475,000  (see  Note    
7),  the  sale  of  a  subsidiary  in  part  for  deferred    
payments  and  debt  of  $8,297,000  (see  Note  16),  the    
purchase  of  inventory  for future  obligations  totaling    
$10,200,000  (see  Note 8), the sale of  fixed  assets  in    
part for a $2,100,000 short-term note receivable, and  the    
financing  of  new  financial and  administrative  systems    
with   a   long-term   note   payable   of   approximately    
$2,000,000.                                                   

NOTE 11: Basic  loss per share is computed using the  weighted                  
average  number  of  common shares  outstanding.   Diluted    
loss  per  share  is computed using the  weighted  average    
number    of   common   and   equivalent   common   shares    
outstanding.   Employee stock options  are  the  Company's    
only  common  stock  equivalent and are  included  in  the    
calculation only if dilutive.                                 

NOTE 12: The  Company's  operating  segments  are  Intergraph                   
Computer  Systems ("ICS"), Intergraph Public Safety,  Inc.    
("IPS"),  the Software and Intergraph Government Solutions    
businesses  (collectively,  the  Software  and  Government    
Solutions  businesses  form what is termed  "Intergraph"),    
and  Z/I  Imaging Corporation ("Z/I Imaging"), a 60%-owned    
subsidiary  of  the  Company  formed  October   1,   1999.    
Effective October 31, 1999, the Company sold its  VeriBest    
operating segment and, accordingly, its operating  results    
are  reflected  in "Loss from discontinued operation,  net    
of  income taxes" in the Company's consolidated statements    
of  operations for the quarter and six months  ended  June    
30,  1999.  Certain VeriBest financial information for the    
quarter and six months ended June 30, 1999 is included  in    
Note 2.                                                       

The  Company's reportable segments are strategic  business    
units  which  are organized by the types of products  sold    
and   the  specific  markets  served.   They  are  managed    
separately   due  to  unique  technology   and   marketing    
strategy resident in each of the Company's markets.           

ICS is historically a supplier of high performance Windows    
NT-based graphics workstations and 3D graphics subsystems.    
IPS develops, markets, and implements systems for the public  
safety and utilities industries. Intergraph supplies software 
and solutions, including  hardware  purchased  from   ICS,    
consulting,  and services to the process and building  and    
infrastructure  industries  and  provides   services   and    
specialized  engineering  and  information  technology  to    
support   Federal   government  programs.    Z/I   Imaging    
supplies  end-to-end photogrammetry solutions  for  front-    
end  data  collection to mapping related  and  engineering    
markets.                                                      

The   Company  evaluates  performance  of  the   operating    
segments  based  on  revenue and income  from  operations.    
The  accounting  policies of the reportable  segments  are    
the  same as those used in preparation of the consolidated    
financial  statements of Intergraph Corporation (see  Note    
1  of  Notes to Consolidated Financial Statements included    
in  the Company's Annual Report on Form 10-K for the  year    
ended  December  31, 1999).  Sales between  the  operating    
segments,  the  most  significant of which  are  sales  of    
hardware  products and maintenance from ICS to  the  other    
segments,  are  accounted  for under  a  transfer  pricing    
policy.  Transfer prices approximate prices that would  be    
charged  for  the  same or similar property  to  similarly    
situated  unrelated  buyers.  In  the  U.S.,  intersegment    
sales  of  products and services to be used  for  internal    
purposes   are   charged  at  cost.    For   international    
subsidiaries,  transfer price is charged  on  intersegment    
sales  of  products  and services to be  used  for  either    
internal purposes or sale to customers.                       

The  following  table  sets forth revenues  and  operating    
income  (loss) by operating segment for the  quarters  and    
six months ended June 30, 2000 and 1999.                      

       ---------------------------------------------------------------------
                                     Quarter                  Six Months
                                    Ended June 30,            Ended June 30,
                                    2000      1999            2000      1999
       ---------------------------------------------------------------------
(In thousands)                                                

Revenues                                                      
ICS:                                                          
         Unaffiliated customers $ 41,179  $ 52,844        $ 83,540  $115,021
         Intersegment revenues    11,660    33,261          27,826    64,409
       ---------------------------------------------------------------------
                                  52,839    86,105         111,366   179,430
       ---------------------------------------------------------------------

IPS:                                                          
         Unaffiliated customers   19,836    22,198          38,983    42,532
         Intersegment revenues     1,909     2,547           4,627     3,504
       ---------------------------------------------------------------------
                                  21,745    24,745          43,610    46,036
       ---------------------------------------------------------------------

Intergraph Software:                                          
         Unaffiliated customers   85,602   114,406         177,360   235,300
         Intersegment revenues     1,971     3,953           4,131     8,566
       ---------------------------------------------------------------------
                                  87,573   118,359         181,491   243,866
       ---------------------------------------------------------------------

Intergraph Government Solutions:                              
         Unaffiliated customers   35,755    37,628          73,956    78,833
         Intersegment revenues     1,508     2,147           2,649     3,706
       ---------------------------------------------------------------------
                                  37,263    39,775          76,605    82,539
       ---------------------------------------------------------------------

Z/I Imaging:                                                  
         Unaffiliated customers    5,609       ---          13,547       ---
         Intersegment revenues     5,762       ---           9,894       ---
       ---------------------------------------------------------------------
                                  11,371       ---          23,441       ---
       ---------------------------------------------------------------------
                                 210,791   268,984         436,513   551,871
       ---------------------------------------------------------------------
        Eliminations              (22,810)  (41,908)        (49,127)  (80,185)
       ---------------------------------------------------------------------
       Total revenues           $187,981  $227,076        $387,386  $471,686
       =====================================================================

       ---------------------------------------------------------------------
Operating income (loss) before nonrecurring charges:          

        ICS                      $    514  $(12,839)       $( 3,566) $(19,506)
       IPS                         1,107     3,259           2,561     5,186
       Intergraph Software        (1,526)    4,137           1,969     7,530
Intergraph Government                                         
        Solutions                  1,441     1,402           4,871     5,635
       Z/I Imaging                 2,480       ---           5,217       ---
        Corporate                  (6,744)  (10,728)        (13,422)  (19,619)
       ---------------------------------------------------------------------
        Total                    $ (2,728) $(14,769)       $( 2,370) $(20,774)
       =====================================================================

Prior  to  October  1999, a portion  of  the  Z/I  Imaging    
business   was   included  in  the   Intergraph   Software    
operating  segment.  The Company believes  the  associated    
revenues  and operating income for the second quarter  and    
first  half  of  1999 were insignificant to  the  Software    
segment as a whole.                                           

Amounts  included in the "Corporate" category  consist  of    
general   corporate   expenses,  primarily   general   and    
administrative  expenses remaining after  charges  to  the    
operating   segments   based   on   segment    usage    of    
administrative  services.  Included in these  amounts  are    
legal fees of $4,404,000 and $7,595,000 for the first  six    
months of 2000 and 1999, respectively.                        

Significant profit and loss items that were not  allocated    
to  the  segments and not included in the  analysis  above    
include   a   charge  of  $8,562,000  for  an  arbitration    
settlement  agreement reached with Bentley  Systems,  Inc.    
in  first  quarter 1999 (see Note 4), an $11,505,000  gain    
on  the  sale of a subsidiary in second quarter 1999  (see    
Note   16),   and   nonrecurring  operating   charges   of    
$2,472,000 incurred in second quarter 1999 (see Note 9).      

The  Company  does  not evaluate performance  or  allocate    
resources  based  on  assets and, as  such,  it  does  not    
prepare  balance sheets for its operating segments,  other    
than those of its wholly-owned subsidiaries.                  

NOTE 13: Comprehensive   income   (loss).    The   Company's                    
comprehensive losses for the second quarter and first  six    
months   of   2000  totaled  $4,108,000  and   $5,051,000,    
respectively,   compared   to  comprehensive   losses   of    
$16,133,000   and  $36,949,000,  respectively,   for   the    
comparable   prior  year  periods.   These   comprehensive    
losses   differ  from  net  loss  due  mainly  to  foreign    
currency translation adjustments.                             

NOTE 14: In June 1998, the Financial Accounting Standards Board                 
("FASB")   issued   Statement  of   Financial   Accounting    
Standards  No. 133, Accounting for Derivative  Instruments    
and  Hedging Activities ("SFAS 133"), requiring  companies    
to  recognize derivatives as either assets or  liabilities    
on  the  balance  sheet and to measure the instruments  at    
fair   value.    In  July  1999,  the  FASB  delayed   the    
implementation of this new accounting standard  to  fiscal    
years  beginning after June 15, 2000 (calendar  year  2001    
for  the  Company).  The Company is evaluating the effects    
of   adopting   SFAS  133  but  does  not   anticipate   a    
significant  impact on its consolidated operating  results    
or financial position.                                        

NOTE 15: In   December  1999,  the  Securities  and  Exchange                   
Commission  ("SEC") issued Staff Accounting  Bulletin  No.    
101,  Revenue  Recognition in Financial  Statements  ("SAB    
101"),   which   provides  guidance  on  the  recognition,    
presentation,  and  disclosure  of  revenue  in  financial    
statements.  SAB 101 outlines basic criteria that must  be    
met  prior to recognition of revenue, including persuasive    
evidence  of the existence of an arrangement, the delivery    
of  products  and  performance of services,  a  fixed  and    
determinable  sales  price, and  reasonable  assurance  of    
collection.    In   June  2000,  the   SEC   delayed   the    
implementation  date of SAB 101 until no  later  than  the    
fourth  fiscal  quarter  of fiscal years  beginning  after    
December  15, 1999 (fourth quarter 2000 for the  Company).    
The  Company  is  currently  evaluating  the  effects   of    
adopting  SAB 101 and will record any material  impact  on    
prior  periods  as the cumulative effect of  a  change  in    
accounting  principle  in its fourth  quarter  results  of    
operations,  with a restatement of prior interim  quarters    
of  2000,  if  necessary.  The SEC has indicated  that  it    
will   issue   further  guidance  with  respect   to   the    
implementation   of  SAB  101.   Until   this   additional    
guidance is issued, the Company cannot fully evaluate  the    
impact,   if  any,  that  this  SAB  will  have   on   its    
consolidated operating results or financial position.         

NOTE 16: In  April  1999,  the Company sold InterCAP  Graphics                  
Systems,  Inc., a wholly-owned subsidiary, to  Micrografx,    
a  global  provider of enterprise graphics  software,  for    
$12,150,000, consisting of $3,853,000 in cash received  at    
closing,  deferred  payments  received  in  September  and    
October   1999  totaling  $2,500,000,  and  a   $5,797,000    
convertible   subordinated  debenture   due   March   2002    
(included  in  "Other assets" in the  June  30,  2000  and    
December  31,  1999  consolidated  balance  sheets).   The    
resulting  gain  on  this transaction  of  $11,505,000  is    
included  in  "Gain on sale of assets" in the consolidated    
statements  of operations for the quarter and  six  months    
ended  June 30, 1999.  InterCAP's revenues and losses  for    
1998   were   $4,660,000  and  $1,144,000,   respectively,    
($3,600,000  and  $1,853,000 for  1997).   Assets  of  the    
subsidiary  at December 31, 1998 totaled $1,550,000.   The    
subsidiary  did  not  have  a  material  effect   on   the    
Company's  results of operations for the  period  in  1999    
prior to its sale.                                            

NOTE 17: On  April 27, 2000, the Company and BSI announced  an                  
agreement   under  which  BSI  will  acquire  Intergraph's    
MicroStation-based     civil    engineering,     networked    
plotservers,   and  raster  conversion  software   product    
lines,  and the Company will sell and support MicroStation    
and certain other BSI products.  The agreement, valued  at    
approximately $42,000,000, is subject to the execution  of    
definitive documents and is expected to close by  the  end    
of  third quarter 2000.  Full year 1999 revenues  for  the    
product  lines to be sold to BSI approximated $35,000,000.    
The  agreement  will  allow the Company  to  increase  its    
focus  on its core vertical businesses and is expected  to    
improve the business relationship between the Company  and    
BSI.                                                          

NOTE 18: On  May  25, 2000, the Company reached an  agreement,                  
subject  to  inspection  and  final  documents,  to   sell    
several  of  the  buildings  on  its  Huntsville,  Alabama    
campus  to an Alabama-based real estate investment company    
for   $7,600,000.   The  resulting  consolidation  of  the    
Company's  Huntsville-based personnel and operations  into    
fewer  buildings  is  expected  to  reduce  the  Company's    
overhead  expenses.  The closing of the sale is  scheduled    
for completion in September 2000.  The Company expects  to    
record   a  nonoperating  gain  on  this  transaction   of    
approximately $2,000,000 in its third quarter  results  of    
operations.                                                   

NOTE 19: Subsequent  Events.  On July 21,  2000,  the  Company                  
completed  the sale of the Intense3D graphics  accelerator    
division  of  ICS  to  3Dlabs,  Inc.  Ltd.  ("3Dlabs"),  a    
leading  supplier  of  integrated  hardware  and  software    
graphics   accelerator  solutions  for  workstations   and    
design  professionals.  As initial consideration  for  the    
acquired   assets,   3Dlabs   issued   to   the    Company    
approximately  3,600,000  of its  common  shares  with  an    
aggregate  market  value of approximately  $13,200,000  on    
the date of closing.  The agreement also contains an earn-    
out  provision based on various performance  measures  for    
Intense3D  operations for the remainder of 2000  following    
the  July  1  effective date of the sale.   This  earn-out    
provides an opportunity for additional proceeds of  up  to    
$25,000,000,  payable in stock and/or cash at  the  option    
of  3Dlabs.   The Company expects to record a pretax  gain    
from   initial  proceeds  of  the  sale  of  approximately    
$9,000,000  in third quarter 2000.  Full year 1999  third-    
party  revenue  for  the  Intense3D division  approximated    
$38,000,000,  with  operating results  at  an  approximate    
breakeven level.                                              

On  July  21,  2000, the Company announced its  intent  to    
form  a  strategic  alliance with Silicon  Graphics,  Inc.    
("SGI"),   a   worldwide  provider   of   high-performance    
computing  and advanced graphics solutions, in  which  SGI    
will  acquire  certain of the Company's hardware  business    
assets,  including ICS's Zx10 family of  workstations  and    
servers.   Under the proposed alliance, the  Company  will    
become  a  reseller for SGI and will offer its application    
solutions  on the SGI platform.  In connection  with  this    
agreement,  the Company plans to purchase $100,000,000  in    
SGI  products and services over a three year  period.  The    
terms  of  the  sale  are  still  being  finalized.    The    
transaction  is expected to close in third  quarter  2000.    

These  two transactions signal completion of the Company's    
exit  of  the  development,  design,  and  manufacture  of    
hardware   products,  allowing  the  Company's   operating    
segments   to   focus   on  providing  software,   systems    
integration,  and  services to  the  industries  in  which    
Intergraph is a market leader.  Upon completion  of  these    
transactions, the Company expects to incur a  nonrecurring    
charge  to  operations  in  the range  of  $10,000,000  to    
$12,000,000,  primarily  for  inventory  and  fixed  asset    
write-offs,  employee severance, and other costs  incurred    
in  connection with the shutdown of the remainder  of  the    
hardware  development business.  The Company will continue    
to  sell  hardware products from other vendors,  including    
SGI, and to perform hardware maintenance services for  its    
installed customer base.  However, the Company anticipates    
that revenues from both of these sources will continue to     
decline over time as hardware will no longer be a primary     
focus of the Company.                                         

INTERGRAPH CORPORATION AND SUBSIDIARIES               
MANAGEMENT'S DISCUSSION AND ANALYSIS OF               
FINANCIAL CONDITION AND RESULTS OF OPERATIONS               

SUMMARY                                                                         
-------                                                                         

Discontinued Operation. In fourth quarter 1999, the Company  sold               
its   VeriBest  operating  segment.  Accordingly,  the  Company's               
consolidated  statements of operations for the  quarter  and  six               
months  ended  June  30, 1999 reflect VeriBest's  business  as  a               
discontinued  operation.   Except  where  noted  otherwise,   the               
following  discussion  of  the Company's  results  of  operations               
addresses only results of continuing operations. The discontinued               
operation  has not been presented separately in the  consolidated               
statement  of cash flows for the six months ended June 30,  1999,               
and  it  is  not segregated from the related discussions.   Other               
than  its  operating  losses  for  the  periods  presented,   the               
discontinued operation did not have a significant impact  on  the               
Company's consolidated cash flow or financial position.  See Note               
2 of Notes to Consolidated Financial Statements contained in this               
Form  10-Q for summarized financial information for the  VeriBest               
operating segment.                                                              

Earnings.   In  second quarter 2000, the Company incurred  a  net               
loss  of $.07 per share on revenues of $188 million, including  a               
$.07  per  share gain on the sale of a European office  building.               
In  second  quarter  1999,  the  Company  incurred  a  loss  from               
continuing  operations of $.20 per share on  revenues  of  $227.1               
million, including an $11.5 million ($.24 per share) gain on  the               
sale  of  a  subsidiary  and  a $2.5  million  ($.05  per  share)               
nonrecurring  operating charge for the resizing of  its  European               
computer   hardware  sales  organization.   Exclusive  of   these               
nonrecurring   charges,  the  second  quarter  2000   loss   from               
operations  improved to $.06 per share from $.30  per  share  for               
second  quarter  1999.  This loss improvement resulted  primarily               
from  a  20%  decline  in  operating expenses  and  a  7.5  point               
improvement in systems gross margin.  For the first half of 2000,               
the Company incurred a net loss of $.05 per share on revenues  of               
$387.4  million, including $.15 per share earned on the  sale  of               
various  capital  assets,  including the aforementioned  building               
sale.   For  the first half of 1999, the Company incurred  a  net               
loss from continuing operations of $.52 per share on revenues  of               
$471.7 million, including an $8.6 million ($.18 per share) charge               
for  settlement  of  its  arbitration  proceedings  with  Bentley               
Systems, Inc. (See "Arbitration Settlement" following), the  $.24               
per  share  gain on the sale of a subsidiary, and  the  $.05  per               
share charge for resizing of the European computer hardware sales               
organization.  Exclusive of these nonrecurring charges, the first               
half  2000  loss from operations improved to $.05 per share  from               
$.43  per  share for first half 1999.  This improvement  was  the               
result  of  an 18% decline in operating expenses and a 7.2  point               
improvement  in  systems gross margin.  Though  the  Company  has               
realized  considerable  improvements  in  its  operating  expense               
levels  and  gross margin, they have not yet been  sufficient  to               
return  the  Company to sustained profitability as the  Company's               
operating results continue to be negatively impacted by operating               
losses  incurred  by  the  Intergraph  Computer  Systems  ("ICS")               
operating  segment, legal fees associated with the  Intel  trial,               
and   temporary   duplication  of  administrative   expenses   in               
connection  with  verticalization  of  the  Company's   operating               
segments.                                                                       

Remainder  of the Year.  The Company expects that the  industries               
in  which it competes will continue to be characterized by higher               
performance  and  lower  priced  products,  intense  competition,               
rapidly  changing  technologies,  shorter  product  cycles,   and               
development and support of software standards that result in less               
specific  hardware and software dependencies by  customers.   The               
Company  believes  that  its operating system  (Windows  NT)  and               
hardware architecture (Intel) strategies are the correct choices.               
However,  competing operating systems and products are  available               
in  the  market, and competitors of the Company offer Windows  NT               
and  Intel  as the systems for their products.  The  Company  has               
lost  significant  market share in this generic  undifferentiated               
market  due  to  the  actions  of Intel  and  has  announced  its               
intentions  to  exit the hardware business.   Subsequent  to  the               
close  of the second quarter, the Company completed the  sale  of               
its graphics accelerator division to 3Dlabs, Inc. Ltd. and announced            
an  agreement  with Silicon Graphics, Inc. with  respect  to  its               
workstation  and  server business that should complete  its  exit               
from   the  hardware  development  and  design  business.    (See               
"Subsequent  Events" following.)  The Company  will  continue  to               
sell  hardware products from other vendors through  its  vertical               
operating segments and perform hardware maintenance services  for               
its installed customer base.                                                    

Improvement  in the Company's operating results will continue  to               
depend   on   its  ability  to  accurately  anticipate   customer               
requirements  and  technological  trends  and  to   rapidly   and               
continuously   develop  and  deliver  new   products   that   are               
competitively  priced,  offer  enhanced  performance,  and   meet               
customers' requirements for standardization and interoperability,               
and  will further depend on its ability to successfully implement               
its   strategic  direction,  which  includes  the  creation   and               
operation  of  independent  business  units.   In  addition,  the               
Company  faces significant operational and financial  uncertainty               
of  unknown  duration due to its dispute with Intel.  To  achieve               
and  maintain profitability, the Company must continue  to  align               
its  operating expenses with the reduced levels of revenue  being               
generated.                                                                      

Nonrecurring Operating Charges. During 1998 and 1999, the Company               
implemented various restructuring actions in an effort to restore               
the Company to profitability.  For a complete discussion, see the               
Company's Annual Report on Form 10-K for the year ended  December               
31,  1999. Restructuring activity during the first six months  of               
1999 and 2000 is discussed below.                                               

In second quarter 1999, in response to continued operating losses               
in its Intergraph Computer Systems ("ICS") operating segment, the               
Company  implemented a resizing of its European computer hardware               
sales  organization.  This resizing involved closing most of  the               
Company's  ICS  subsidiaries  in  Europe  and  consolidating  the               
European hardware sales effort within the Intergraph subsidiaries               
in  that  region.  The associated cost of $2.5 million, primarily               
for   employee   severance  pay,  is  included  in  "Nonrecurring               
operating  charges" in the consolidated statements of  operations               
for   the   quarter  and  six  months  ended   June   30,   1999.               
Approximately 46 European positions were eliminated, all  in  the               
sales  and  marketing  area.   The Company  estimates  that  this               
resizing  has  resulted  in annual savings  of  approximately  $3               
million.                                                                        

Cash  outlays for severance related to the 1998 and 1999  actions               
approximated $3.5 million and $.9 million in the first six months               
of  2000  and  1999, respectively. At June 30,  2000,  the  total               
remaining  accrued liability for severance relating to  the  1999               
reductions  in force was approximately $1.4 million  compared  to               
approximately $5 million at December 31, 1999.  These liabilities               
are  reflected  in  "Other  accrued expenses"  in  the  Company's               
consolidated balance sheets.  The related costs are  expected  to               
be  paid  over  the  remainder of 2000 and  relate  primarily  to               
severance  liabilities  in  European countries,  where  typically               
several months are required for settlement.                                     

Severance  payments to date have been funded from  existing  cash               
balances  and  from  proceeds from the  sale  of  VeriBest.   For               
further   discussion  regarding  the  Company's  liquidity,   see               
"Liquidity and Capital Resources" following.                                    

Litigation.  As further described in the Company's Annual  Report               
on Form 10-K for the year ended December 31, 1999 and its Form 10-              
Q for the quarter ended March 31, 2000, the Company is subject to               
certain   risks  and  uncertainties  and  has  extensive  ongoing               
litigation   with  Intel  Corporation.   Significant   litigation               
developments during second quarter 2000 are discussed below.                    

Intel Litigation.  On June 4, 1999, the U.S. District Court,  the               
Northern District of Alabama, Northeastern Division (the "Alabama               
Court")   granted  the  Company's  September  15,   1998   motion               
requesting  summary adjudication in favor of the Company  on  its               
patent infringement claims and ruled that Intel has no license to               
use  the  Company's Clipper patents as Intel had claimed  in  its               
motion  for summary judgment.   On October 12, 1999, the  Alabama               
Court reversed its June 4, 1999 order and dismissed the Company's               
patent claims against Intel.  The Company is confident that Intel               
has  no license to use the Clipper patents and believes that  the               
court's  original decision on this issue was correct.  On October               
15,  1999,  the Company appealed the Alabama Court's October  12,               
1999  order.  Oral argument for this appeal was heard on June  7,               
2000.  No decision has been entered.                                            

On  March 10, 2000, the Alabama Court entered an order dismissing               
the  antitrust claims of the Company against Intel, based in part               
upon a February 17, 2000 decision by the Appeals Court in another               
case (CSU v. Xerox).  The Company considers this dismissal to  be               
in  error  and  intends to vigorously pursue its  antitrust  case               
against  Intel.   On  April 26, 2000, the Company  appealed  this               
dismissal  to the United States Court of Appeals for the  Federal               
Circuit.                                                                        

On March 17, 2000, Intel filed a series of motions in the Alabama               
Court  to  dismiss  certain Alabama   state  law  claims  of  the               
Company.   The Company filed its responses to Intel's motions  on               
July  17, 2000, together with its own motions to dismiss  certain               
Intel  counter-claims.   Intel's  responses  are  not  due  until               
October  13,  2000, and no decision on either party's  motion  is               
expected before fourth quarter 2000.                                            

The trial date for this case, previously scheduled for June 2000,               
has  been continued.  A formal schedule has not yet been entered,               
but  the Company believes it likely that trial may be rescheduled               
for the summer of 2001.                                                         

The  Company  has  other ongoing litigation,  none  of  which  is               
considered to represent a material contingency for the Company at               
this time.  However, any unanticipated unfavorable ruling in  any               
of  these  proceedings  could  have  an  adverse  impact  on  the               
Company's results of operations and cash flow.                                  

Arbitration   Settlement.   The  Company  maintains   an   equity               
ownership position in Bentley Systems, Incorporated ("BSI"),  the               
developer and owner of MicroStation, a software product  utilized               
in  many of the Company's software applications and for which the               
Company serves as a nonexclusive distributor.  In March 1996, BSI               
commenced  arbitration  against the  Company  with  the  American               
Arbitration  Association,  Atlanta,  Georgia,  relating  to   the               
respective  rights  of  the  companies  under  their  April  1987               
Software  License  Agreement  and other  matters,  including  the               
Company's  alleged  failure  to  properly  pay  to  BSI   certain               
royalties  on  its  sales of BSI software products,  and  seeking               
significant  damages.  On March 26, 1999,  the  Company  and  BSI               
executed a Settlement Agreement and Mutual General Release  ("the               
Agreement")  to settle this arbitration and mutually release  all               
claims  related  to  the  arbitration or  otherwise,  except  for               
certain litigation between the companies that was the subject  of               
a  separate  settlement agreement and payment  for  products  and               
services  obtained or provided in the normal course  of  business               
since January 1, 1999.  Both the Company and BSI expressly denied               
any  fault,  liability, or wrongdoing concerning the claims  that               
were the subject matter of the arbitration and settled solely  to               
avoid continuing litigation with each other.                                    

Under the terms of the Agreement, the Company on April 1, 1999                  
made  payment  to  BSI  of  $12 million and  transferred  to  BSI               
ownership of three million of the shares of BSI's Class A  common               
stock  owned by the Company.  The transferred shares were  valued               
at  approximately  $3.5  million on the Company's  books.   As  a               
result  of the settlement, Intergraph's equity ownership  in  BSI               
was   reduced  from  approximately  50%  to  approximately   33%.               
Additionally, the Company had a $1.2 million net receivable  from               
BSI relating to business conducted prior to January 1, 1999 which               
was written off in connection with the settlement.                              

In  first quarter 1999, the Company accrued a nonoperating charge               
to  earnings  of approximately $8.6 million ($.18 per  share)  in               
connection  with  the  settlement, representing  the  portion  of               
settlement costs not previously accrued.  This charge is included               
in  "Arbitration  settlement" in the  consolidated  statement  of               
operations for the six months ended June 30, 1999.                              

The $12 million payment to BSI was funded primarily from existing               
cash  balances.  For further discussion regarding  the  Company's               
liquidity, see "Liquidity and Capital Resources" following.                     

Year  2000 Issue.  The Company successfully completed all aspects               
of  its  Year  2000 readiness program with respect  to  both  its               
internal  systems  and its products.  As  of  the  date  of  this               
filing,  the  Company  has encountered no significant  Year  2000               
problems.   However,  any undetected errors  or  defects  in  the               
current  product offerings of the Company or its suppliers  could               
result   in   increased  costs  for  the  Company  and  potential               
litigation over Year 2000 compliance issues.                                    

The Company employed no additional resources to complete its Year               
2000 readiness program, and as a result, the related costs, which               
were  funded  from operations and expensed as incurred,  did  not               
have  a material impact on its results of operations or financial               
condition.   Year  2000  related  changes  in  customer  spending               
patterns  have  not  had,  and are not  anticipated  to  have,  a               
material impact on the Company's orders or revenues.                            

ORDERS/REVENUES                                                                 
---------------                                                                 

Orders.   Second quarter and first half 2000 systems and services               
orders  totaled  $173.6  million and $316 million,  respectively,               
reflecting  declines of approximately 10% and 14% from  the  same               
prior  year  periods.  Second quarter and first half 1999  orders               
included  $4.5 million and $8.4 million, respectively, in  orders               
of  the  Company's discontinued VeriBest operation.  U.S.  orders               
declined  by  7% and 13%, respectively, and international  orders               
declined  by  13% and 14%, respectively, from the second  quarter               
and  first  half 1999 levels.  The orders decline  is  attributed               
primarily  to  the  weakening demand for the  Company's  hardware               
products  as  the result of the Company's decision to  exit  this               
market,  though  weakness  was noted in  the  Company's  software               
segments  as well.  The Company believes the weakness in software               
orders  is due in part to transitioning to vertical units in  the               
software  businesses, but may also be related  to  the  announced               
exit  from the hardware business.  Second quarter orders improved               
by  22% from the first quarter 2000 level.  International orders,               
particularly in Europe, have also been adversely affected by  the               
strengthening of the U.S. dollar. The Company estimates that this               
strengthening of the dollar resulted in an approximate 2% decline               
in  its reported systems and services orders from the first  half               
1999 level.                                                                     

Revenues.  Total revenues for second quarter and first half  2000               
were $188 million and $387.4 million, respectively, down 17%  and               
18%, respectively, from the comparable prior year periods due  to               
the expected decline in hardware revenues and first quarter order               
softness in the vertical software businesses.  Sales outside  the               
U.S. represented approximately 53% of total revenues for the  six               
months ended June 30, 2000, up from 51% for the comparable  prior               
year  period  and  52%  for  the  full  year  1999,  despite  the               
strengthening of the dollar.  European revenues comprised 28%  of               
total  revenues for first half 2000 compared to 31% for the first               
half and full year 1999.                                                        

Systems.   Systems revenue for the second quarter and first  half               
of 2000 was $123.2 million and $257.6 million, respectively, down               
20%  from  the  comparable  prior year  periods.   Factors  cited               
previously  as  contributing to the decline in orders  have  also               
adversely  affected systems revenues, and competitive  conditions               
manifested  in  declining  per  unit  sales  prices  continue  to               
adversely  affect  the  Company's systems  revenues  and  margin.               
Systems  revenues  in Europe, the U.S., and the Americas  (Canada               
and  Latin  America) declined by 31%, 22%, and 16%, respectively,               
from  first  half  1999 levels, while MidWorld and  Asia  Pacific               
systems   revenues   increased  by  23%  and  8%,   respectively.               
Excluding  the impact of a stronger dollar, the European  revenue               
decline  was 24%. Asia Pacific revenues, however, were positively               
impacted  by  weakening of the dollar against the  currencies  of               
that  region.  The improvement in MidWorld revenues is attributed               
primarily to sales made by Z/I Imaging, a 60%-owned subsidiary of               
the Company formed in fourth quarter 1999.                                      

Hardware revenues for the first half of 2000 declined by 34% from               
the comparable prior year period.  Unit sales of workstations and               
servers  were  down  68%, while workstation and  server  revenues               
declined  by 57%, as the average per unit selling price increased               
by 35%.  The Company has announced that it will exit the hardware               
development  and  design business and has  taken  actions  in  an               
effort to complete this exit by the end of 2000.  See "Subsequent               
Events"  following.  Software revenues declined by 16%  from  the               
first  half  1999  level.   Declines in sales  of  plant  design,               
information  management, photogrammetry and  government  software               
were  partially offset by a significant improvement in  sales  of               
Geomedia  software.  Plant design remains the  Company's  highest               
volume  software  offering, representing 29%  of  total  software               
sales for the first half of 2000.                                               

Maintenance. Revenue from maintenance of Company systems  totaled               
$41.5  million for the second quarter and $83.8 million  for  the               
first  half  of  2000,  down 9% and 12%, respectively,  from  the               
comparable  prior  year  periods. This decline  was  concentrated               
primarily  in  the U.S. and Europe.  The trend  in  the  industry               
toward  lower  priced  products and longer warranty  periods  has               
resulted  in  reduced  levels  of maintenance  revenue,  and  the               
Company believes this trend will continue in the future.                        

Services. Services revenue, consisting primarily of revenues from               
Company  provided training and consulting, totaled $23.2  million               
for  the  second quarter and $46 million for the  first  half  of               
2000,  down 14% and 16%, respectively, from the comparable  prior               
year  periods  with the largest declines occurring in  the  U.S.,               
Europe,   and   MidWorld.   Services  are  becoming  increasingly               
significant to the Company's business, representing approximately               
12%  of  total revenue for the second quarter and first  half  of               
2000.   The Company is endeavoring to grow its services  business               
and  has  redirected  efforts to focus  increasingly  on  systems               
integration.   Revenues from these services,  however,  typically               
fluctuate significantly from quarter to quarter and produce lower               
gross margins than systems or maintenance revenues.                             

GROSS MARGIN                                                                    
------------                                                                    

The  Company's  total gross margin for second  quarter  2000  was               
36.7%, up 3.5 points from the second quarter 1999 level.  For the               
first  half of 2000, total gross margin was 36.5%, up 3.8  points               
from  the  first half of 1999 and 4.8 points from the  full  year               
1999 level.                                                                     

Systems  margin for the second quarter was 38%,  up  2.1  points                
from  the first quarter level and 7.5 points from second quarter                
1999.   First half 2000 systems margin was 36.9 %, up 7.2 points                
from  first  half 1999 and 6.9 points from the full  year  1999.                
The  upward  trend in the Company's systems margin is  primarily                
due  to an increasing software content in the product mix as the                
Company's  hardware revenues continue to decline.  Additionally,                
Z/I Imaging, a subsidiary formed in fourth quarter 1999, has had                
a  positive impact on the Company's systems margin due  to  high                
margins  earned on sales of reconnaissance cameras.   Full  year                
1999  systems  margin was negatively impacted by  a  $7  million                
inventory  write-off incurred in connection with  the  Company's                
decision to exit the PC and generic server businesses.                          

In  general,  the Company's systems margin may be improved  by  a               
higher  software content in the product mix, a weaker U.S. dollar               
in  international markets, a higher mix of international  systems               
sales  to  total  systems  sales, and  reductions  in  prices  of               
component parts, which generally tend to decline over time in the               
industry.  Systems margins may be lowered by price competition, a               
higher  hardware  content in the product  mix,  a  stronger  U.S.               
dollar  in  international markets, the effects  of  technological               
changes on the value of existing inventories, and a higher mix of               
federal  government sales, which generally produce lower  margins               
than  commercial sales.  While unable to predict the effects that               
many of these factors may have on its systems margin, the Company               
expects  continued improvement as the Company completes its  exit               
of   the   hardware  development  and  design  business,  derived               
primarily  from an increased software content in the product  mix               
and  a  reduction  in inventory carrying and obsolescence  costs.               
However,  third quarter 2000 margins will be negatively  impacted               
by  a  one  time charge to write down the value of any  inventory               
remaining  after the exit from the hardware development  business               
is  complete.   Due to a number of uncertainties associated  with               
this  exit,  including closing of the transaction with  SGI,  the               
Company is at present unable to estimate the amount of the charge               
that  will  be incurred.  Additionally, the Company continues  to               
expect pressure on its systems margin as the result of increasing               
industry price competition.                                                     

Maintenance margin for the second quarter of 2000 was 45.8%, down               
5.1  points  from  the  second quarter of  1999.   Year  to  date               
maintenance  margin is 46.2%, down 3 points from the  same  prior               
year period and up .2 points from the full year 1999 level.   The               
decline  from first half 1999 is due primarily to the decline  in               
revenues discussed previously.  The Company continues to  monitor               
its  maintenance  cost  closely and has taken  certain  measures,               
including reductions in headcount, to align these costs with  the               
current level of revenue.  The Company believes that the trend in               
the  industry  toward lower priced products and  longer  warranty               
periods  will continue to curtail its maintenance revenue,  which               
will  pressure maintenance margin in the absence of corresponding               
cost reductions.                                                                

Services margin for the second quarter of 2000 was 13.8%, down  5               
points  from  the second quarter of 1999.  Year to date  services               
margin  is  16.3%,  down 5.5 points from the corresponding  prior               
year period and up .3 points from the full year 1999 level.   The               
decline  from first half 1999 is due primarily to the decline  in               
services   revenue  from  the  prior  year  period.   Significant               
fluctuations  in  services revenues and margins  from  period  to               
period  are  not  unusual as the incurrence of costs  on  certain               
types  of service contracts may not coincide with the recognition               
of  revenue.  For contracts other than those accounted for  under               
the  percentage-of-completion  method,  costs  are  expensed   as               
incurred,  with  revenues recognized either at  the  end  of  the               
performance  period  or  based  on milestones  specified  in  the               
contract.   Year  to  date  2000  margins  have  been  negatively               
impacted   by  a  large  services  contract  which   is   nearing               
completion.   Costs  continue to be incurred, but  the  remaining               
revenue  on  the  contract will not be recognized until  contract               
completion, which is anticipated to occur in third quarter 2000.                

OPERATING EXPENSES                                                              
------------------                                                              

Operating  expenses, exclusive of nonrecurring charges,  for  the               
second  quarter and first half of 2000 declined by 20%  and  18%,               
respectively,  from  the  comparable  prior  year  periods.    In               
response  to  the level of its operating losses, the Company  has               
taken  various actions, including employee terminations and sales               
of  unprofitable  business  operations,  to  reduce  its  average               
employee  headcount by approximately 18% from  first  half  1999.               
Sales and marketing expense for the second quarter and first half               
of  2000  declined by 30% and 28%, respectively,  from  the  same               
prior  year periods as the result of reductions in headcount  and               
reduced  public  relations expenses.   The  Company's  sales  and               
marketing  expenses  are inherently activity  based  and  can  be               
expected   to  fluctuate  with  activity  levels.   General   and               
administrative expense for the second quarter and first  half  of               
2000  decreased by 18% and 10%, respectively, from the same prior               
year  periods  due to a decline in legal fees as  the  result  of               
reduced activity related to the Intel litigation and a decline in               
European   compensation  expenses  as  the  result   of   reduced               
headcount.   The  Company expects that its  legal  expenses  will               
continue to fluctuate with the activity level associated with the               
Intel  trial.   Additionally,  the  Company  is  experiencing   a               
temporary duplication of administrative expenses in the  U.S.  in               
connection with its efforts to verticalize its operating segments               
and   decentralize  portions  of  the  corporate   administrative               
function.   The Company expects that these expenses will  decline               
by  the  end of 2000.  Product development expense for the second               
quarter  was  basically flat with the second quarter  1999  level               
while such expense for the first half of 2000 declined by 4% from               
the  corresponding prior year period.  The decline from the first               
half  1999  level  was primarily the result  of  the  decline  in               
headcount.                                                                      

NONOPERATING INCOME AND EXPENSE                                                 
-------------------------------                                                 

Interest expense was $1.1 million for the second quarter and $2.3               
million  for the first half of 2000 versus $1.4 million and  $2.8               
million,  respectively, for the corresponding prior year periods.               
The Company's average outstanding debt has declined in comparison               
to  the  same  prior year periods due primarily to  repayment  of               
borrowings   utilizing  proceeds  from  the  sales   of   various               
businesses  and  assets.  See "Liquidity and  Capital  Resources"               
following  for  a  discussion of the Company's current  financing               
arrangements.                                                                   

In  April 1999, the Company sold InterCAP Graphics Systems, Inc.,               
a  wholly-owned subsidiary, to Micrografx, a global  provider  of               
enterprise  graphics software, for $12.2 million,  consisting  of               
$3.9  million  in  cash  received at closing,  deferred  payments               
received in September and October 1999 totaling $2.5 million, and               
a  $5.8 million convertible subordinated debenture due March 2002               
(included in "Other assets" in the June 30, 2000 and December 31,               
1999  consolidated balance sheets).  The resulting gain  on  this               
transaction  of  $11.5 million is included in "Gain  on  sale  of               
assets"  in  the  consolidated statements of operations  for  the               
quarter  and six months ended June 30, 1999.  InterCAP's revenues               
and   losses  for  1998  were  $4.7  million  and  $1.1  million,               
respectively,  ($3.6 million and $1.9 million for 1997).   Assets               
of the subsidiary at December 31, 1998 totaled $1.6 million.  The               
subsidiary  did  not  have  a material effect  on  the  Company's               
results of operations for the period in 1999 prior to its sale.                 

"Other income (expense) - net" in the consolidated statements  of               
operations   consists  primarily  of  interest  income,   foreign               
exchange  gains  and  losses, and other  miscellaneous  items  of               
nonoperating income and expense.  Significant items  included  in               
this  amount  for the first half of 2000 are gains  on  sales  of               
capital assets of $7.2 million, including a $1.5 million gain  on               
termination of a long-term capital lease (see Note 10 of Notes to               
Consolidated Financial Statements contained in this  Form  10-Q),               
and  a foreign exchange loss of $1.5 million.  Similar items  for               
the  first half of 1999 include gains on sales of capital  assets               
of $1.4 million and an exchange loss of $2.4 million.                           

IMPACT OF CURRENCY FLUCTUATIONS AND CURRENCY RISK MANAGEMENT                    
------------------------------------------------------------                    

Fluctuations  in  the value of the U.S. dollar  in  international               
markets can have a significant impact on the Company's results of               
operations.  For the first half of 2000, approximately  53%  (52%               
for  the  full year 1999) of the Company's revenues were  derived               
from  customers  outside  the United  States,  primarily  through               
subsidiary  operations.  Most subsidiaries sell to customers  and               
incur  and pay operating expenses in local currency.  These local               
currency revenues and expenses are translated to U.S. dollars for               
reporting  purposes.  A stronger U.S. dollar  will  decrease  the               
level  of reported U.S. dollar orders and revenues, decrease  the               
dollar  gross margin, and decrease the reported dollar  operating               
expenses  of the international subsidiaries.  For the first  half               
of  2000, the U.S. dollar strengthened on average from its  first               
half  1999  level,  which  decreased  reported  dollar  revenues,               
orders,  and  gross  margin, but also decreased  reported  dollar               
operating  expenses in comparison to the prior year period.   The               
Company  estimates that this strengthening of the U.S. dollar  in               
its   international  markets,  primarily  in  Europe,  negatively               
impacted its results of operations for the first half of 2000  by               
approximately $.05 per share in comparison to the first  half  of               
1999.                                                                           

The  Company  conducts business in all major markets outside  the               
U.S.,  but the most significant of these operations with  respect               
to   currency  risk  are  located  in  Europe  and  Asia.   Local               
currencies  are  the  functional  currencies  for  the  Company's               
European   subsidiaries.   The  U.S.  dollar  is  the  functional               
currency for all other international subsidiaries.  With  respect               
to  the currency exposures in these regions, the objective of the               
Company  is  to  protect against financial  statement  volatility               
arising  from changes in exchange rates with respect  to  amounts               
denominated for balance sheet purposes in a currency  other  than               
the  functional currency of the local entity.  The  Company  will               
therefore  enter  into  forward  exchange  contracts  related  to               
certain  balance sheet items, primarily intercompany receivables,               
payables, and formalized intercompany debt, when a specific  risk               
has  been  identified.  Periodic changes in the  value  of  these               
contracts  offset exchange rate related changes in the  financial               
statement  value of these balance sheet items.  Forward  exchange               
contracts,  generally  less than three months  in  duration,  are               
purchased  with  maturities reflecting  the  expected  settlement               
dates  of  the  balance sheet items being  hedged,  and  only  in               
amounts  sufficient to offset possibly significant currency  rate               
related  changes  in the recorded values of these  balance  sheet               
items, which represent a calculable exposure for the Company from               
period  to  period.   Since this risk is  calculable,  and  these               
contracts  are purchased only in offsetting amounts, neither  the               
contracts themselves nor the exposed foreign currency denominated               
balance  sheet items are likely to have a significant  effect  on               
the  Company's financial position or results of operations.   The               
Company  does  not generally hedge exposures related  to  foreign               
currency  denominated assets and liabilities that are not  of  an               
intercompany   nature,  unless  a  significant  risk   has   been               
identified.   It  is  possible  that  the  Company  could   incur               
significant  exchange gains or losses in the case of significant,               
abnormal  fluctuations in a particular currency.  By policy,  the               
Company   is  prohibited  from  market  speculation  via  forward               
exchange contracts and therefore does not take currency positions               
exceeding its known financial statement exposures, and  does  not               
otherwise trade in currencies.                                                  

At  December  31,  1999, the Company's only  outstanding  forward               
contracts related to formalized  intercompany loans  between  the               
Company's  European  subsidiaries  and  were  immaterial  to  the               
Company's  financial  position.   The  Company  had  no   forward               
contracts outstanding at June 30, 2000.                                         

Euro Conversion.  On January 1, 1999, eleven member countries  of               
the European Monetary Union ("EMU") fixed the conversion rates of               
their  national  currencies  to a  single  common  currency,  the               
"Euro."   The national currencies of the participating  countries               
will  continue  to exist through July 1, 2002, and Euro  currency               
will begin to circulate on January 1, 2002.  All of the Company's               
financial systems currently accommodate the Euro, and during 1999               
and first half 2000, the Company conducted business in Euros with               
its customers and vendors who chose to do so without encountering               
significant  problems.  While the Company continues  to  evaluate               
the  potential impacts of the common currency, it at present  has               
not identified significant risks related to the Euro and does not               
anticipate that full Euro conversion in 2002 will have a material               
impact  on its results of operations or financial condition.   To               
date, the conversion to one common currency has not impacted  the               
Company's pricing in its European markets.                                      

INCOME TAXES                                                                    
------------                                                                    

The  Company  earned pretax income of $1.3 million in  the  first               
half  of 2000 versus a pretax loss from continuing operations  of               
$25.1 million in the first half of 1999.  Income tax expense  for               
the  first  half  of  2000  resulted  primarily  from  taxes   on               
individually  profitable  majority owned subsidiaries,  including               
the  Company's 60% ownership interest in Z/I Imaging.  The  first               
half  1999  loss  from  continuing operations  generated  no  net               
financial  statement tax benefit, as tax expenses in individually               
profitable   international  subsidiaries  offset  available   tax               
benefits.   There was no material income tax expense  or  benefit               
related to the Company's discontinued operation.                                

RESULTS BY OPERATING SEGMENT                                                    
----------------------------                                                    

In  second  quarter  2000,  Intergraph  Computer  Systems  earned               
operating  income  of $.5 million on revenues of  $52.8  million,               
compared to a second quarter 1999 operating loss of $12.8 million               
on  revenues of $86.1 million.  Year-to-date, ICS has incurred an               
operating  loss  of $3.6 million on revenues of  $111.4  million,               
compared  to  an operating loss of $19.5 million on  revenues  of               
$179.4  million  for  first half 1999.  These  operating  results               
exclude  the impact of certain nonrecurring income and  operating               
expense  items  associated with ICS's operations,  including  the               
nonrecurring operating charges of $2.5 million incurred in second               
quarter  1999.   ICS's operating loss improvement for  the  first               
half  of  2000 resulted primarily from an approximate 47% decline               
in  operating  expenses  as the result  of  headcount  reductions               
achieved  in 1999.  During 1999, ICS's headcount was  reduced  by               
approximately  35%  as  the result of employee  terminations  and               
attrition, with the majority of the reductions occurring  in  the               
sales  and  marketing area.  Although total revenues declined  by               
38%,  ICS's gross margin improved 4.2 points to 18.1%  for  first               
half  2000.  In second quarter 2000, ICS's gross margin  improved               
to 21.8%, resulting in breakeven results for the quarter.  Income               
earned  for  the  quarter  was  primarily  attributable  to   the               
Intense3D  graphics division of ICS.  The ICS business  has  been               
significantly adversely impacted by factors associated  with  the               
Company's  dispute with Intel.  (See the Company's Annual  Report               
on  Form 10-K for the year ended December 31, 1999 for a complete               
discussion of the Company's dispute with Intel and its effects on               
the  operations  of ICS and the Company.) As a result,  in  first               
quarter  2000, the Company announced its intention  to  exit  the               
hardware  development  and design business.   Subsequent  to  the               
close  of the second quarter, the Company completed the  sale  of               
ICS's Intense3D graphics accelerator division to 3Dlabs, Inc. and               
announced  an agreement with Silicon Graphics, Inc. with  respect               
to ICS's workstation and server business that should complete its               
exit  from  the  hardware development and design business.   (See               
"Subsequent  Events" following.)  The Company  will  continue  to               
sell  hardware products from other vendors through  its  vertical               
operating segments and perform hardware maintenance services  for               
its installed customer base.  Effective with the shutdown of ICS,               
the  Company's  hardware maintenance operation will  be  combined               
with Intergraph Government Solutions.                                           

In second quarter 2000, Intergraph Public Safety earned operating               
income of $1.1 million on revenues of $21.7 million, compared  to               
operating  income  in  second quarter 1999  of  $3.3  million  on               
revenues   of  $24.7  million.   Year-to-date,  IPS  has   earned               
operating  income  of $2.6 million on revenues of  $43.6  million               
versus  operating  income  of $5.2 million  on  revenues  of  $46               
million  in  first  half  1999.  Improvements  in  the  segment's               
systems and maintenance margins were offset by a 28% increase  in               
operating  expenses.  In anticipation of increasing  orders,  the               
Utilities  division  of  IPS  has  increased  its  headcount   by               
approximately  30% from the first half 1999 level,  primarily  in               
the product development and marketing areas.  Additionally, IPS's               
general  and administrative expenses have increased by  24%  from               
the prior year period due to legal expenses incurred in Australia               
for an inquiry related to a large contract award.  It is too soon               
to tell whether this inquiry will result in a legal proceeding of               
any  significance with respect to the IPS operating segment.  The               
IPS  business is characterized by large orders that are difficult               
to  forecast  and cause revenues to fluctuate significantly  from               
quarter  to quarter.  Second quarter 2000 was negatively impacted               
by  negotiation delays on several projects.  Orders and  revenues               
are expected to increase during the second half of the year.                    

In  second  quarter  2000,  the  Software  business  incurred  an               
operating  loss  of  $1.5 million on revenues of  $87.6  million,               
compared to second quarter 1999 operating income of $4.1  million               
on  revenues  of  $118.4  million.   Year-to-date,  the  Software               
business has earned operating income of $2 million on revenues of               
$181.5  million  versus  operating  income  of  $7.5  million  on               
revenues  of $243.9 million in first half 1999.  These  operating               
results  exclude  the impact of certain nonrecurring  income  and               
operating  expense  items  associated with  Software  operations,               
including  the first quarter 1999 arbitration settlement  accrual               
of  $8.6 million and the second quarter 1999 gain on the sale  of               
InterCAP  of $11.5 million.  Although total gross margin remained               
flat  with the first half 1999 level at  approximately 40%, a 26%               
decline  in  revenues  resulted in  a  significant  reduction  in               
operating  income,  and  in  an operating  loss  for  the  second               
quarter.  The impact of the revenue decline was partially  offset               
by  a  20% decline in operating expenses from the first half 1999               
level.   During  1999,  the segment reduced and  reorganized  its               
sales  force  to align its expenses more closely with  the  lower               
volume of revenue being generated.                                              

Intergraph Government Solutions earned operating income  of  $1.4               
million  on revenues of $37.3 million in second quarter 2000  and               
$39.8  million in second quarter 1999.  Year-to-date,  Government               
Solutions has earned operating income of $4.9 million on revenues               
of $76.6 million, compared to operating income of $5.6 million on               
revenues of $82.5 million in first half 1999.  Though first  half               
revenues  declined by 7% from the prior year period, total  gross               
margin  improved  by  3.1  points  to  24.3%,  due  primarily  to               
improvements  in  the segment's systems margins.   However,  this               
improvement  was offset by a 16% increase in operating  expenses,               
primarily  the  result  of increased general  and  administrative               
expense  resulting from verticalization of the operating segment,               
including implementation of a new accounting system, and from  an               
increase  in bad debt expenses from the corresponding prior  year               
period.                                                                         

In  second  quarter 2000, Z/I Imaging earned operating income  of               
$2.5 million on revenues of $11.4 million.  Year-to-date, Z/I has               
earned  operating  income of $5.2 million on  revenues  of  $23.4               
million.  This was the segment's third full quarter of operations               
since its inception on October 1, 1999.  Prior to October 1999, a               
portion  of this business was included in the Intergraph Software               
operating segment.  The Company believes the associated  revenues               
and  operating  income for the second quarter and first  half  of               
1999  were  insignificant to the Software  segment  as  a  whole.               
Systems revenues were higher than expected for the first half  of               
2000 as sales of reconnaissance cameras were strong.  Total gross               
margin  for the second quarter and first half of 2000  was  56.3%               
and  54.2%, respectively, reflecting the high margins  earned  on               
software as well as on sales of reconnaissance cameras.                         

See  Note  12  of Notes to Consolidated Financial Statements  for               
further   explanation  and  details  of  the  Company's   segment               
reporting.                                                                      

LIQUIDITY AND CAPITAL RESOURCES                                                 
-------------------------------                                                 

At  June  30, 2000, cash totaled $92.5 million compared to  $88.5               
million  at  December 31, 1999.  Cash generated by operations  in               
the  first  half  of  2000  totaled $17 million,  compared  to  a               
consumption of $4.1 million in the first half of 1999.  The first               
half 2000 cash generation reflects the Company's improved results               
of  operations  and  increased focus on  collection  of  accounts               
receivable.   The first half 1999 cash consumption  included  the               
$12   million   payment  to  BSI  (See  "Arbitration  Settlement"               
preceding.)                                                                     

Net  cash generated by investing activities totaled $1.9  million               
in  the  first  half  of 2000, compared to  a  $2.5  million  net               
generation  in the first half of 1999. First half 2000  investing               
activities  included $16.7 million in proceeds from the  sale  of               
capital  assets.   First half 1999 investing activities  included               
$24.6  million in proceeds from sales of assets, including  $19.9               
million  in  proceeds from the fourth quarter 1998  sale  of  the               
Company's   manufacturing  assets  (See  Note  8  of   Notes   to               
Consolidated  Financial Statements contained in this  Form  10-Q)               
and  $3.1  million  net proceeds from the sale  of  the  InterCAP               
subsidiary.    Other  significant  first  half   2000   investing               
activities  included  expenditures  for  capitalizable   software               
development costs of $8.5 million ($9.6 million in the first half               
of  1999) and capital expenditures of $4.2 million ($5.7  million               
in  the  first  half of 1999), primarily for Intergraph  products               
used in hardware and software development and sales and marketing               
activities.   The Company expects that capital expenditures  will               
require  $8 to $10 million for the full year 2000, primarily  for               
these  same  purposes.   The Company's term  loan  and  revolving               
credit  agreement contains certain restrictions on the  level  of               
the Company's capital expenditures.                                             

Net  cash used for financing activities totaled $12.1 million  in               
the  first  half of 2000, compared to $16.5 million in the  first               
half  of  1999.  Net debt repayments during first half  2000  and               
1999  totaled  $13  million and $17.9 million, respectively.   In               
first  half  2000, the Company used approximately $7  million  to               
repay  its  Australian term loan and $4 million to  pay  off  the               
mortgage on a disposed European office building.  First half 1999               
activity  relates  primarily  to  the  Company's  term  loan  and               
revolving credit agreement.                                                     

An  additional  reduction  in the Company's  long-term  debt  was               
achieved through the termination of a long-term lease on  one  of               
the  Company's  facilities in first quarter  2000.   The  Company               
accounted  for  this lease as a financing, and upon  termination,               
long-term debt of $8.3 million and property, plant, and equipment               
of $6.5 million were removed from the Company's books.                          

Under  the  Company's January 1997 six year fixed term  loan  and               
revolving  credit agreement, available borrowings are  determined               
by  the amounts of eligible assets of the Company (the "borrowing               
base"),   as   defined  in  the  agreement,  primarily   accounts               
receivable,  with maximum availability of $80 million.   The  $25               
million  term loan portion of the agreement is due at  expiration               
of  the  agreement.   Borrowings  are  secured  by  a  pledge  of               
substantially all of the Company's assets in the U.S. and certain               
international   receivables.   The  rate  of  interest   on   all               
borrowings  under  the  agreement is the greater  of  7%  or  the               
Norwest Bank Minnesota National Association base rate of interest               
(9.5%  at June 30, 2000) plus .625%, and there are provisions  in               
the  agreement that will lower the interest rate upon achievement               
of   sustained  profitability  by  the  Company.   The  agreement               
requires the Company to pay a facility fee at an annual  rate  of               
.15%  of  the amount available under the credit line,  an  unused             
credit  line fee at an annual rate of .25% of the average  unused               
portion  of the revolving credit line, and a monthly agency  fee.               
At  June 30, 2000, the Company had outstanding borrowings of  $25               
million (the term loan) which are classified as long-term debt in               
the  consolidated balance sheet, and an additional $23.6  million               
of  the  available  credit  line was  allocated  to  support  the               
Company's  letters of credit and forward exchange contracts.   As               
of  this  same date, the borrowing base, representing the maximum               
available credit under the line, was approximately $64.2 million.               

The  term  loan  and revolving credit agreement contains  certain               
financial covenants of the Company, including minimum net  worth,               
minimum   current   ratio,   and  maximum   levels   of   capital               
expenditures,  and restrictive covenants that  limit  or  prevent               
various  business  transactions  (including  repurchases  of  the               
Company's stock, dividend payments, mergers, acquisitions  of  or               
investments in other businesses, and disposal of assets including               
individual businesses, subsidiaries, and divisions) and limit  or               
prevent  certain other business changes without  approval.    The               
Company's  net  worth  covenant  was  reduced  to  $200   million               
effective  June  30, 2000.  Additionally, the agreement  required               
the  Company  to  retain, pending a return to profitability,  the               
services  of  an  investment banking firm to advise  the  Company               
regarding    potential   partnering   arrangements   and    other               
alternatives   for   its   computer  hardware   business.    This               
requirement was waived in second quarter 2000.                                  

At  June  30, 2000, the Company had approximately $40 million  in               
debt  on  which  interest is charged under various floating  rate               
arrangements,  primarily  its six year term  loan  and  revolving               
credit agreement and a European mortgage.  The Company is exposed               
to  market  risk of future increases in interest rates  on  these               
loans.                                                                          

The  Company has generated positive operating cash flow  for  the               
third  consecutive  quarter, primarily  the  result  of  improved               
accounts  receivable collections and operating expense  declines.               
The  Company expects to sustain this improvement in its operating               
cash  flows  throughout 2000 as a result of headcount  reductions               
and other expense savings actions taken during 1999.  The Company               
is   managing  its  cash  very  closely  and  believes  that  the               
combination  of improved cash flow from operations, its  existing               
cash  balances,  and  cash available under its  revolving  credit               
agreement  will be adequate to meet cash requirements  for  2000.               
However,  the  Company  must  continue  to  align  its  operating               
expenses with the reduced levels of revenue being generated if it               
is  to  fund  its  operations  and build  cash  reserves  without               
reliance on funds from external financing.  For the longer  term,               
the  Company anticipates no significant nonoperating events  that               
will require the use of cash.                                                   

SUBSEQUENT EVENTS                                                               
-----------------                                                               

On July 21, 2000, the Company completed the sale of the Intense3D               
graphics  accelerator  division  of  ICS  to  3Dlabs,  Inc.  Ltd.               
("3Dlabs"),  a  leading  supplier  of  integrated  hardware   and               
software  graphics  accelerator solutions  for  workstations  and               
design  professionals.  As initial consideration for the acquired               
assets, 3Dlabs issued to the Company approximately 3.6 million of               
its common shares with an aggregate market value of approximately               
$13.2  million  on  the  date  of closing.   The  agreement  also               
contains  an  earn-out  provision based  on  various  performance               
measures  for  Intense3D operations for  the  remainder  of  2000               
following  the July 1 effective date of the sale.  This  earn-out               
provides  an  opportunity for additional proceeds of  up  to  $25               
million,  payable in stock and/or cash at the option  of  3Dlabs.               
The Company expects to record a pretax gain from initial proceeds               
of  the  sale of approximately $9 million in third quarter  2000.               
Full  year  1999  third-party revenue for the Intense3D  division               
approximated   $38  million,  with  operating   results   at   an               
approximate breakeven level.                                                    

On  July  21, 2000, the Company announced its intent  to  form  a               
strategic  alliance  with  Silicon  Graphics,  Inc.  ("SGI"),   a               
worldwide  provider  of high-performance computing  and  advanced               
graphics  solutions,  in which SGI will acquire  certain  of  the               
Company's  hardware business assets, including ICS's Zx10  family               
of  workstations and servers.  Under the proposed  alliance,  the               
Company  will  become  a  reseller for SGI  and  will  offer  its               
application  solutions on the SGI platform.  In  connection  with               
this agreement, the Company plans to purchase $100 million in SGI               
products and services over a three year period.  The terms of the               
sale  are still being finalized.  The transaction is expected  to               
close  in  third quarter 2000.                                                  

These two transactions signal completion of the Company's exit of               
the  development,  design, and manufacture of hardware  products,               
allowing  the Company's operating segments to focus on  providing               
software, systems integration, and services to the industries  in               
which  Intergraph is a market leader.  Upon completion  of  these               
transactions, the Company expects to incur a nonrecurring  charge               
to  operations  in  the  range of $10  million  to  $12  million,               
primarily  for  inventory  and fixed asset  write-offs,  employee               
severance,  and  other  costs incurred  in  connection  with  the               
shutdown  of the remainder of the hardware development  business.               
The  Company will continue to sell hardware products  from  other               
vendors,  including  SGI,  and  to perform  hardware  maintenance               
services for its installed customer base.  However, the Company                 
anticipates that revenues from both of these sources will continue              
to decline over time as hardware will no longer be a primary focus              
of the Company.                                                                 

INTERGRAPH CORPORATION AND SUBSIDIARIES               

Item  3:  Quantitative and Qualitative Disclosures About Market Risk            
----------------------------------------------------------  

The  Company  has experienced no material  changes  in      
market  risk  exposures that affect the  quantitative  and  
qualitative  disclosures presented in the  Company's  Form  
10-K filing for its year ending December 31, 1999.          

PART II.  OTHER INFORMATION                                                     
-----------------                                           

Item 1:  Legal Proceedings                                                  
-----------------                                         

On  June  4, 1999, the U.S. District Court, the  Northern 
District  of Alabama, Northeastern Division (the "Alabama 
Court")  granted the Company's September 15, 1998  motion 
requesting  summary adjudication in favor of the  Company 
on  its  patent infringement claims and ruled that  Intel 
has  no  license to use the Company's Clipper patents  as 
Intel  had  claimed  in its motion for summary  judgment. 
On  October 12, 1999, the Alabama Court reversed its June 
4,  1999 order and dismissed the Company's patent  claims 
against  Intel.  The Company is confident that Intel  has 
no  license to use the Clipper patents and believes  that 
the  court's original decision on this issue was correct. 
On  October  15, 1999, the Company appealed  the  Alabama 
Court's  October 12, 1999 order.  Oral argument for  this 
appeal  was heard on June 7, 2000.  No decision has  been 
entered.                                                  

On  March  10, 2000, the Alabama Court entered  an  order 
dismissing  the  antitrust claims of the Company  against 
Intel, based in part upon a February 17, 2000 decision by 
the  Appeals  Court in another case (CSU v. Xerox).   The 
Company  considers  this dismissal to  be  in  error  and 
intends  to vigorously pursue its antitrust case  against 
Intel.   On  April  26, 2000, the Company  appealed  this 
dismissal to the United States Court of Appeals  for  the 
Federal Circuit.                                          

On March 17, 2000, Intel filed a series of motions in the 
Alabama Court to dismiss certain Alabama state law claims 
of  the  Company.   The Company filed  its  responses  to 
Intel's  motions on July 17, 2000, together with its  own 
motions to dismiss certain Intel counter-claims.  Intel's 
responses  are  not due until October 13,  2000,  and  no 
decision  on  either  party's motion is  expected  before 
fourth quarter 2000.                                      

The  trial  date for this case, previously scheduled  for 
June 2000, has been continued.  A formal schedule has not 
yet been entered, but the Company believes it likely that 
trial may be re-scheduled for the summer of 2001.         

Item  4:  Submission of Matters to a  Vote  of  Security Holders                
------------------------------------------------------      

Intergraph   Corporation's   Annual    Meeting    of        
Shareholders  was held on May 18, 2000.   The  results  of  
the meeting follow.                                         

(1) Eight  directors  were elected  to  the  Board  of      
   Directors  to  serve  for the ensuing  year  and  until
   their  successors are duly elected and qualified.   All
   nominees,  with the exceptions of Lawrence R. Greenwood
   and  Joseph C. Moquin, were serving as Directors of the
   Company  at  the  time  of  their  nomination  for  the
current year.                                       

                           Votes
                              ----------------------------
                                 For      Against/Withheld
                              ----------  ----------------
Lawrence R. Greenwood      45,823,980       830,823 
Larry J. Laster            45,906,553       748,250 
Thomas J. Lee              45,908,066       746,737 
Sidney L. McDonald         45,896,840       757,963 
James W. Meadlock          42,790,825     3,863,978 
Joseph C. Moquin           45,813,149       841,654 
James F. Taylor Jr.        45,912,701       742,102 
Robert E. Thurber          45,243,240     1,411,563 

(2) The  2000  Intergraph Corporation  Employee  Stock      
   Purchase  Plan  was  approved by a vote  of  26,867,573
   for,   1,124,907  against,  126,324  abstentions,   and
18,535,999 broker non-votes.                        

(3) Ratification  of the appointment of Ernst  &  Young     
   LLP  as  the  Company's independent  auditors  for  the
   current year was approved by a vote of 46,492,241  for,
76,342 against, and 86,220 abstentions.             

Item  6:  Exhibits and Reports on Form 8-K                                      
--------------------------------                            

(a) Exhibit 27, Financial Data Schedule                             

(b) There  were no reports on Form 8-K filed during the quarter     
ended June 30, 2000.                                        

INTERGRAPH CORPORATION AND SUBSIDIARIES               
SIGNATURES                

Pursuant  to the requirements of the Securities  Exchange                 
Act  of  1934, the registrant has duly caused this report                 
to  be  signed on its behalf by the undersigned thereunto                 
duly authorized.                                                          

INTERGRAPH CORPORATION                
----------------------                
(Registrant)                

By: /s/ James F. Taylor Jr.         By: /s/ John W. Wilhoite                    
------------------------            ----------------------------          
James F. Taylor Jr.                 John W. Wilhoite                      
Chief Executive Officer             Executive Vice President and          
                     Chief Financial Officer
                      (Principal Financial and
                 Accounting Officer)

Date:  August 11, 2000              Date:  August 11, 2000                      

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing		Date		Other Filings
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		1/1/02
		10/13/00
Filed on:		8/11/00
		7/21/00
		7/17/00
For Period End:		6/30/00		10-Q/A
		6/15/00
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		5/25/00
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		4/27/00
		4/26/00
		3/31/00		10-Q
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		3/10/00
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		12/31/99		10-K,  10-K/A
		12/15/99
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		10/15/99
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		10/1/99
		7/2/99
		6/30/99		10-Q
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		4/1/99		8-K
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		12/31/98		10-K
		9/15/98
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