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Oracle Corporation Reports Profits Up 46 Percent in Record Second Quarter

December 10, 1998
Total Revenue Tops $2 Billion; EPS, $0.28

REDWOOD SHORES, Calif., Dec. 10, 1998 -- Oracle Corporation (Nasdaq: ORCL) today announced record second quarter results for the period ended November 30, 1998. Revenues for the second quarter increased 27 percent (28 percent in local currencies) to $2.1 billion from $1.6 billion in the same period last year. Net income for the period increased 46 percent to $274 million, or $0.28 per share, compared to net income of $187 million, or $0.19 per share, in the same period last year.

Revenue from Oracle's two businesses, database and applications, totaled $8.0 billion in the last four quarters. The database business, including database, tools and related services, grew 25 percent to $1.5 billion in revenues for the quarter and $5.8 billion for the last four quarters, continuing its position as the largest database business in the world. Revenues from the applications business and related services grew 35 percent to $578 million in revenues for the second fiscal quarter and $2.1 billion for the last four quarters, continuing Oracle's position as the second largest applications business in the world.

Product related revenues (license and support) in the second quarter grew by 25 percent versus the same period last year, led by strong growth in database products. Oracle's Education and Consulting services revenue increased 34 percent during the quarter, indicating continued strong demand for both businesses.

Oracle reported continued strong growth in Americas and EMEA (Europe, Middle East and Africa) and significant improvement in Asia Pacific. Americas revenue was up 30 percent (31 percent in local currencies) in the second quarter versus the same period last year. EMEA was up 31 percent (29 percent in local currencies), versus the same period last year. Asia Pacific was up 7 percent in reported dollars (up 14 percent in local currencies) versus the same period last year, reflecting modest improvement in both economic conditions and currency impact in Asia Pacific.

"Our database revenue growth accelerated as Oracle has become the database of choice for Internet commerce," said Lawrence J. Ellison, Chairman and Chief Executive Officer. "Nine of the top ten business-to-business e-commerce web sites use the Oracle database. Ten of the top ten consumer e-commerce web sites use the Oracle database. Virtually every big web site in the world uses Oracle because of Oracle's ability to handle large numbers of users and huge amounts of data reliably, securely and economically."

"Release 11 of our applications, the only enterprise applications that are 100% accessible through an Internet browser, is now live at 21 customers including Oracle's own U.S. business and shipments to over 1,300 customers have been made to date," said Jeffrey O. Henley, Executive Vice President and Chief Financial Officer. "Oracle's Americas application license growth rebounded to 31% growth in its second quarter. This is a very encouraging trend particularly in light of the fact that historically, performance in the Americas has been a leading indicator of international adoption rates."

Oracle made a number of significant announcements during the quarter:

  • * Oracle8i was formally launched to more than 18,000 customers, partners, and developers at Oracle Open World on November 11, 1998. Oracle8i has been in beta testing at more than 200 customer and partner sites since August. Oracle8i extends Oracle's proven technology leadership in the areas of transaction processing, data warehousing, mobile computing and high availability systems. Oracle8i is the centerpiece of Oracle's Internet computing platform which also includes Oracle Application Server 4.0 and specialized development tools. This powerful combination of technologies will deliver scalable, reliable and cost effective computing to businesses.
  • * Oracle announced that hundreds of leading hardware vendors, independent software vendors (ISVs), and systems integrators (SIs) are delivering breakthrough applications and services based on Oracle8i, the world's only database for Internet computing. Together, Oracle and its partners are delivering products and services in virtually every major industry category that make Internet computing a reality.
  • * Collaborative Research survey revealed 69 percent of the world's top Web sites are using Oracle technology, and an impressive 70 percent of the remaining non-Oracle sites plan to evaluate Oracle products within the next six months.
  • * Oracle announced over 1,300 customers have been shipped Oracle Applications Release 11 since it became available in April. All of the more than 45 modules are web-enabled, allowing them to be deployed on corporate Intranets with no software other than a browser required on users' desktops. This architecture allows companies to shift the complexity of application management, maintenance and upgrading from users' desktops onto centralized, professionally managed servers, thereby dramatically reducing the cost of deploying and administering software.
  • * Oracle announced Oracle Front Office Version 3.0, its latest version of front office applications that provides full call center functionality to enable sales, service and marketing capabilities, including the first mobile sales and service applications for the Palm Pilot, that are unmatched by competitive offerings.
  • * Oracle agreed to acquire Concentra Corporation, a leading configurator software provider, for $43 million in cash. This acquisition will give Oracle the industry's most powerful configurator engine which Oracle will use as a core technology for its electronic commerce, sales automation, and unassisted selling in manufacturing businesses ranging from simple assembly to complex engineer-to-order products.
  • vendor of computer telephony integration (CTI)-enabled customer interaction software, for $12 million in cash. This acquisition enhances our front office call center offering and continues our strategy of integrating powerful sales and marketing solutions with our ERP application suite.
  • * Oracle announced a pilot program for its Oracle Business OnLine hosting service for enterprise business applications. Business OnLine frees subscribing customers from having to worry about hardware and software upgrades, capacity planning, hiring of scarce IT personnel, or disaster recovery, as all such issues will be managed at the data center, transparently to customers. Subscribers will receive a flexible service that offers high availability and predictable costs, that can be expanded with their needs.

Oracle Corporation is the world's leading supplier of software for information management, and the world's second largest independent software company. With annual revenues of over $8.0 billion, the company offers its database, tools and application products, along with related consulting, education, and support services, in more than 145 countries around the world. For more information about Oracle, please call Oracle Investor Relations at 650-506-4073 or see Oracle's World Wide Web page: http://www.oracle.com/.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act 1995: Information in this release relating to Oracle's future prospects which are "forward-looking statements" are subject to certain risks and uncertainties that could cause actual results to differ materially, including, but not necessarily limited to the following: (1) Management's ability to manage growth, continuously hire and retain significant numbers of qualified employees, forecast revenues and control expenses continues to be a challenge. An unexpected decline in the growth rate of revenues without a corresponding and timely slowdown in expense growth could have a material adverse effect on results of operations. (2) The market for Oracle's products is intensely competitive and is characterized by rapid technological advances and frequent new product introductions. There can be no assurances that Oracle will continue to introduce new products and new versions of existing products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. (3) Intense competition in the various markets in which Oracle competes may put pressure on Oracle to reduce prices on certain products, particularly in the departmental database marketplace. (4) Delays in product delivery or closing of sales can cause quarterly revenues and income to fall significantly short of anticipated levels. (5) Oracle is introducing new products, such as web applications servers and network computing software; the market acceptance and contribution to Oracle's revenues of these products cannot be assured. (6) A significant amount of current demand for applications software may be generated by customers in the process of replacing and upgrading applications in order to accommodate the change in date to the year 2000. Once such customers have completed such preparations, the software industry and Oracle may experience a significant deceleration from the strong annual growth rates recently experienced in the applications software marketplace. In addition, Oracle may generally experience increased expenses in addressing issues associated with the transition to software that is year 2000 compliant. Oracle undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with Oracle's business, please refer to the "Risk Factors" section of Oracle Corporation's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Oracle Corporation's Investor Relations Department at 650-506-4073 or Oracle's Investor Relations website at http://www.oracle.com/. NOTE: Oracle is a registered trademark of Oracle Corporation. All other trademarks are property of their respective holders.

                              ORACLE CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                   ($ in thousands, except per share data)
                                 (unaudited)

                                2nd Quarter Ended         Six Months Ended
                                   November 30              November 30
                                -----------------        -----------------

                                1998         1997       1998         1997
                                ----         ----       ----          ---

    REVENUES
     Licenses and other       $767,428     $645,366  $1,349,893   $1,176,008
     Services                1,288,516      968,361   2,455,162    1,806,548
                             ---------    ---------   ---------    ---------
       Total Revenues        2,055,944    1,613,727   3,805,055    2,982,556
                             ---------    ---------   ---------    ---------

    OPERATING EXPENSES
     Sales and marketing       591,754      528,490   1,101,830      977,941
     Cost of services          779,847      548,631   1,459,137    1,016,798
     Research and
      development (B)          200,678      183,217     388,301      342,884
     General and
      administrative           101,598       81,383     195,883      156,897
     Acquired in-process
      research and
      development (A)               --           --          --      167,054
                             ---------    ---------   ---------    ---------
       Total Operating
        Expenses             1,673,877    1,341,721   3,145,151    2,661,574
                             ---------    ---------   ---------    ---------

    OPERATING INCOME           382,067      272,006     659,904      320,982
     Other income
      (expense) (A)             28,654       16,248      50,819       56,222
                             ---------    ---------   ---------    ---------
    INCOME BEFORE TAXES        410,721      288,254     710,723      377,204
     Provision for
      income taxes             136,645      100,930     241,646      181,409
                             ---------    ---------   ---------    ---------
    NET INCOME (A)            $274,076     $187,324    $469,077     $195,795
                             =========    =========   =========    =========

    EARNINGS PER SHARE (A)
     Basic                       $0.28        $0.19       $0.48        $0.20
     Diluted                     $0.28        $0.19       $0.48        $0.19

    Shares Outstanding
     Basic                     963,840      982,491     968,367      980,888
     Diluted                   983,270    1,008,558     986,210    1,007,412

    (A) Acquisition charges incurred in the first quarter of fiscal 1998
included in-process research and development charges of $91,500 and $75,554,
respectively, for the Treasury Services Corporation and Navio Communications,
Inc. merger transactions that closed in August, 1997.  Excluding the effect of
these transactions, which also included a credit of $25,726 for minority
interest in other income (expense), the provision for income taxes would have
been 35% and net income and earnings per share for the six months ended
November 30, 1997 would have been $337,123 and $0.33 per share, respectively.
    (B) In accordance with Statement of Financial Accounting Standards No. 86,
$7,783 and $12,895 were capitalized in the quarters ended November 30, 1998
and 1997, respectively.  Amortization of capitalized software costs was $7,749
and $12,804 in the quarters ended November 30, 1998 and 1997, respectively.

                              ORACLE CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               ($ in thousands)

                                            November 30,        May 31,
                                                1998              1998
                                             (unaudited)

    ASSETS
    Current Assets
     Cash and short term investments         $1,908,067       $1,919,199
     Trade receivables, net                   1,604,336        1,857,480
     Prepaid and refundable income taxes        314,849          260,624
     Other current assets                       260,621          285,747
                                              ---------        ---------
       Total Current Assets                   4,087,873        4,323,050
                                              ---------        ---------

    Long-term cash investments                  152,128          186,511
    Property and equipment, net                 976,662          934,350
    Computer software development
     costs, net                                  98,867           99,012
    Other assets                                331,061          276,088
                                              ---------        ---------
    TOTAL ASSETS                             $5,646,591       $5,819,011
                                              =========        =========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
     Notes payable, including
      current maturities                         $7,878           $2,924
     Accounts payable                           296,963          239,698
     Income taxes                                99,762          181,354
     Customer advances and unearned
      revenues                                  800,214          877,087
     Other current liabilities                1,047,649        1,183,102
                                              ---------        ---------
       Total Current Liabilities              2,252,466        2,484,165
                                              ---------        ---------

    Long-term debt                              304,201          304,337

    Long-term liabilities                        58,265           57,095

    Deferred income taxes                        16,349           15,856

    Stockholders' equity                      3,015,310        2,957,558
                                              ---------        ---------

    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                    $5,646,591       $5,819,011
                                              =========        =========

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