[LWN Logo]


From: Katharine_Hanley@magic-sw.com
To: nfo@lsl.com, lwn@lwn.net, editor@lwn.net, mkelleher@mfi.com,
Date: Tue, 27 Jul 1999 07:45:07 -0700
Subject: Linux International Board Member Magic Software Enterprises Post
	 Third Straight Quarter of Record Sales and Earnings

Linux International Board member, Magic Software Enterprises, announced
today that it had posted record sales and earnings for the third quarter in
a row.  The company attributed its success to its increased awareness
resulting from its involvement with the Linux community.  Magic, who will
be bringing a LIVE penguin to LinuxWorld Expo on August 10-12, 1999, in San
Jose to help introduce its new e-commerce solution for the Linux platform,
provides its application development technology free to Linux developers to
help motivate development of solutions for this ever-growing operating
system.  Mad Dog Hall, one of the original founders of the Linux movement,
will be participating in the Magic press conference on Tuesday, August 10,
at 9:00 a.m. in Meeting Room K of the San Jose Convention Center where both
MeL (the LIVE penguin) and eMerchant (Magic's ecommerce solution) will be
introduced.

The attached press release provides further details of Magic's record
quarter.  Please feel free to contact me should you have any additional
questions or require any additional information.  We look forward to seeing
you at the LinuxWorld Expo and the Magic press conference.

Best regards,

Katharine Hanley
khanley@magic-sw.com
949/250-1718 ext. 220


PRESS RELEASE

Contact:
Katharine Hanley
Public Relations
Magic Software Enterprises, Inc.
(949) 250-1718 ext. 220
khanley@magic-sw.com

Israel Teiblum
Chief Financial Officer
Magic Software Enterprises, Ltd.
+972-3-538-9311 or 9489
iteiblum@magic-sw.com


MAGIC SOFTWARE CONTINUES TO POST
RECORD RESULTS


OR YEHUDA, ISRAEL (July 27, 1999) - Magic Software Enterprises,
Ltd. reported its second quarter financial results. For the third quarter
in a row, Magic's sales and earnings reached record levels despite some
negative impact from foreign currency exchange rates.

Second Quarter Results
Total revenues for the second quarter 1999 were $15.32 million as compared to $8.84 million for the comparable three-month period in l998, a 73% increase over last year and a 13% increase over revenues posted in the first quarter of 1999.  Net income for the quarter rose to $2.28 million ($0.29 earnings per share) from the $6.52 million loss ($1.15 loss per share) posted for the corresponding period of 1998, a 61% increase over the first quarter of 1999.

Software sales for the period increased to $8.82 million, or 90% greater
than the same quarter last year, representing 57% of total revenues.  The
increase was due primarily to the strong performance in Southeast Asia
(particularly Japan), Israel and the Netherlands. The Americas also turned
in a strong performance, almost doubling their previous quarterly
revenues.

Maintenance, support and service revenues were up 55% compared to the
second quarter of 1998, representing 43% of total revenues.  This result
was in line with general market trends and the increased confidence in
Magic's core technology.

Jack Dunietz, Chief Executive Officer of Magic, commented, "The Asian
market continues to have a positive impact on Magic's sales and
profitability, supporting the Company's decision to expand its presence in
this region.  In addition, positive market acceptance for our increased
solutions offerings and for our involvement with the Linux community has
intensified awareness of Magic, particularly in businesses seeking to grow
their profitability through powerful e-commerce and other business
solutions."

Second Quarter Developments
Several major developments occurred during the second quarter, which are
expected to add to Magic's growth in the future.  The Company acquired a
majority interest in Magic Software Thailand ("MST") to further exploit
opportunities in the Asian Pacific region.  Magic's 70% interest in MST
comes on top of the controlling interest (80%) the Company purchased in
Magic Software Japan.  Japan has made a sizeable contribution to the
Company's financial results in both the first and second quarters of this
year.

Another significant development during the quarter was Magic's selection by
IBM to build internal business applications for the AS/400 in Brazil.
Because of Magic's ability to complement and co-exist with native AS/400
technologies, and easily extend applications to the Internet, IBM is now
shipping a Magic CD with each new AS/400 sold in that country.  This
development should help Magic increase its AS/400 sales in Brazil, as well
as add credibility to the Company's efforts to grow markets in other Latin
American countries.

Also during the second quarter, Magic introduced Magic Web Online, its
innovative new Java-based technology that brings interactive processing to
Web applications to help simplify Web page updates and increase business'
transaction processing capacity.  Magic Web Online is included in the new
Magic Enterprise Edition V8.3, as well as in Magic's awarding-winning
e-commerce solution, eMerchant(.

In addition, Magic continued to add new, sizeable corporate accounts during
the second quarter.    In Spain, Magic signed a major new deal with El
Corte Ingles, one of the country's largest systems integrators. In Taiwan,
FGIT (the country's largest security investment fund management company)
will use Magic to develop and deploy an e-commerce system for Web-based
real-time trading of investments and securities.

Other new deals included General Electric Financial Assurance (U.S.);
Allium, SEPEPN and CNOUS:/Civitas (France); GetPak and Hapit (Netherlands);
Marketing Tools & Technologies (Italy); and the Inverclyde District Council
(United Kingdom).  In addition, Magic Software Thailand contributed by
closing major deals with Loxley Information Services Co., Ltd. to build a
comprehensive billing solution, Alpha Office Automation to develop a high
school library management system, and TIP and Associate to provide a
jewelry business package.

Conference Call
Magic will host a conference call on Wednesday, July 28, at 1:00 p.m. EST
(10:00 a.m. PST), to discuss the Company's second quarter financial
results.  To participate, interested parties should call the appropriate
number listed below five to ten minutes prior to the start of the
conference call.

	United States:	1 (800) 288-8960
	Internationally:	   (612) 332-1214


Callers should reference "Magic Software Earnings Release" with the AT&T
Operator.

In addition, investors will have the opportunity to listen to the
conference call over the Internet through Vcall, a service of the Investor
Broadcast Network, at http://www.vcall.com.  To listen to the "live" call,
investors should go to the website at least 15 minutes early to register,
download, and install any necessary audio software.  For those who cannot
listen to the live broadcast, a replay of the conference call will be
available for up to 90 days on the Vcall website.

About Magic Software
Magic Software Enterprises offers the most productive, state-of-the-art
development technology, customizable applications, and services for
cost-effectively solving business problems.  Using Magic, companies can
efficiently leverage their existing resources and take advantage of
emerging technologies.

Magic technology, applications and services are available through a global
network of subsidiaries, distributors and solutions partners in more than
50 countries.  The Company is located at 1642 Kaiser Avenue, Irvine,
Calif., 92614, telephone (949) 250-1718, fax (949) 250-7404,
http://www.magic-sw.com.

Except for the historical information contained herein, the matters
discussed in this news release include forward-looking statements that may
involve a number of risks and uncertainties.  Actual results may vary
significantly based upon a number of factors including, but not limited to,
risks in product and technology development, market acceptance of new
products and continuing product demand, the impact of competitive products
and pricing, changing economic conditions, both here and abroad, release
and sales of new products by strategic resellers and customers, and other
risk factors detailed in the Company's most recent annual report and other
filings with the Securities and Exchange Commission.



Unaudited Consolidated Statement of Operations 





(US Dollars in Thousands)






Three Months
ended June 30,
Six Months
ended June 30,


1999
1998
1999
1998

Revenues
.
.
.

  Software sales
$8,815  
$4,642  
$16,419  
$9,236  

  Maintenance
2,540
1,210
4,525
2,286

  Consultancy & other services
3,968
2,990
8,010
5,506

Total Revenues
$15,323
$8,842
$28,954
$17,028

Cost of Revenues





  Software sales
1,021
725
1,817
1,329

  Maintenance
861
939
1,659
1,839

  Consultancy & other services
2,777
2,214
5,377
4,287

Total Cost of Revenues
4,659
3,878
8,853
7,455

Gross Profit
$10,664
$4,964
$20,101
$9,573

Research & development, net
679
717
1,294
1,523

Sales & marketing, net 
4,809
4,453
9,472
7,899

General & administrative expenses
2,505
3,565
4,806
5,028

Restructuring costs & non-recurring expenses

2,677

2,677

Operating Income  (Loss)
$2,671
($6,448)
$4,529
($7,554)

Financial (income) expenses, net
239
47
530
159

Income (Loss) before taxes
2,432
(6,495)
3,999
(7,713)

Taxes on income
20
11
62
36

Income (Loss) before minority interest
2,412
(6,506)
3,937
(7,749)

Minority interest in losses (income)  of subsidiaries
(154)
(29)
(290)
44

Equity in  earnings (losses) of affiliate
22
16
46
(54)







Net Income (Loss)
$2,280  
($6,519)
$3,693  
($7,759)







Income (Loss) per share
$0.29  
($1.15)
$0.47  
($1.47)

Diluted income (loss) per share
$0.27  
($1.15)
$0.43  
($1.47)

Weighted average number of shares outstanding
7946
5671
7910
5271

Diluted weighted average number of shares outstanding
8,513
5,671
8,523
5,217



Unaudited Balance Sheet
(US Dollars in Thousands)






June
30,
1999
December
 31,
1998



Assets





Current Assets





Cash and cash equivalents
$7,053
$5,828



Accounts receivable :





       Trade receivables
13,483
11,466



       Related parties
-
40



       Other receivables and prepaid
       Expenses
2,777
1,724



Total Current  Assets
$23,312
$19,058



Severance pay fund
1,138
988



Investments in an affiliated companies
223
404



Fixed assets, net
7,009
5,108



Other assets, net
9,274
6,823



Total Assets
$40,956
$32,381



Liabilities





Current Liabilities





Short-term bank debt
$118  
$436  



Trade payables
3,302
1,918



Payables - parent and affiliated companies
145
-



Accrued expenses and other liabilities
11,771  
11,435  



Total Current Liabilities
$15,336  
$13,789  



Long-term loans
1,412  
-  



Accrued severance pay
2,249  
1,445  



Minority interests
411
11









Shareholders' Equity





Share capital
264
261



Capital surplus
29,828
29,113



Retained earnings
(8,545)
(12,238)



Total Shareholders' Equity
$21,548
$17,136




$40,956
$32,381