F I N A N C I A L

For Immediate Release
Contact:   John M. Bogdan, Chief Financial Officer
ON Technology Corporation
(617) 692-3160

ON TECHNOLOGY ANNOUNCES REVENUES AND EARNINGS FOR ITS SECOND QUARTER OF 1998

Cambridge, Ma., July 21, 1998 - ON Technology Corporation (NASDAQ: ONTC) today announced revenues and earnings for it's second quarter ended June 30, 1998. Revenues for the second quarter were $5,010,000, a decrease of 30% from revenues for the quarter ended June 30, 1997, after adjusting for the impact of the Company's decision to exit the virus business and sell certain product lines to Elron Software. The anticipated decline in revenues for continuing products, year to year, was principally driven by the Company's decision to significantly reduce investments in free trial direct marketing activities designed to attract new groupware customers. When compared to total revenues reported for the quarter ended June 30, 1997, the decrease was 65%. Net loss for the quarter was ($1,736,000) or ($0.14) per share, which compares to a net loss of ($767,000) or ($0.06) per share for the same period last year.

Highlights in Q2 include:

  • May 19, 1998, announced certification as a Premier member of the Tivoli Partner Program via the integration of ON Command CCM™ (Comprehensive Client Manager), an open and scalable desktop management system, with Tivoli's Enterprise Software.

  • June 8, 1998, announced ON Command CCM V4.0, a significant upgrade to version 3.1 featuring the addition of client migration mode, new open programming interfaces and support for industry standards such as Intel's (NASDAQ: INTL) Wired for Management (WfM) specification, as well as "snap-in" integration with the Microsoft (NASDAQ: MSFT) Management Console (MMC).

  • June 16, 1998 at PC EXPO, demonstrated the benefits of Wired for Management (WfM) with hardware and software products from 3Com, Dell, Gateway and Intel. Wired for Management features include Pre-boot eXecution Environment (PXE) as well as Remote Wake Up (RWU) and Desktop Management Interface (DMI) 2.0.

  • Successfully closed 23 new ON Command CCM customers around the world including Bank of New York, Teachers Insurance, Copeland Companies, Cantor Fitzgerald, Bundesverwaltungsamt (federal administration agency of Germany), Charite' and Swissair.

"We are particularly pleased with the new account penetration that ON Command CCM has achieved worldwide in the second quarter", said Herman DeLatte, Chief Executive Officer of the Company. "We continue to see our customer's Y2K and new PC roll-out initiatives driving much of this account growth."

On February 11, 1998, ON Technology announced that it had received shareholder approval to sell its Network Management and Network Security Business along with the related marketing systems and organization to Elron Software, Inc., a wholly owned subsidiary of Elron Electronics Industries (NASDAQ: ELRNF) for $12 million in cash with the possibility of an additional performance bonus up to $1.5 million. Assets sold in the transaction included the ON Guard Firewall, the ON Guard Internet Manager, ON's SofTrack marketing license, and the Editor's Choice Network Management catalog. Included in the transaction was the transfer of approximately 100 employees from ON Technology to Elron Software. ON Technology now consists of two business units. Desktop Management, which develops and markets ON Command CCM (Comprehensive Client Manager), the Company's open and scalable enterprise desktop management solution; and Groupware, which develops and markets Meeting Maker™, ON Technology's leading real-time enterprise scheduling solution, and Notework and DaVinci e-mail products.

ON Technology Corporation is a publicly held company based in Cambridge, Massachusetts. Founded in 1985, ON Technology provides open and scalable solutions that result in financial, operational and strategic benefits for enterprise networks. More information about ON Technology can be found at www.on.com.

Forward Looking Statement: Statements contained herein that are not historical statements (including but not limited to, statements concerning estimates of future revenues, operating expenses and product introductions) constitute forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following risk factors, among other factors (including the accuracy of the Company's internal estimates of revenue and operating expense level), may cause the Company's actual results to differ materially from the results stated in such forward-looking statements: variability of the Company's quarterly operating results; rapid technological change in the software industry; competition; product development; inclusion of groupware applications and certain client management software features in system software and applications suites; dependence on key customers; potential acquisitions; marketing products through distributors and resellers; protection of proprietary technology; international revenue; dependence on key personnel; possible volatility of stock price; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.

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