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Financial News Details

Oracle Corporation Reports Record First Quarter; EPS $0.20

September 10, 1998

REDWOOD SHORES, Calif., Sept. 10, 1998 -- Oracle Corporation (Nasdaq: ORCL) today announced record first quarter results for the period ended August 31, 1998. Revenues for the first quarter increased 28 percent (33 percent in local currencies) to $1.7 billion from $1.4 billion in the same period last year. Net income for the period increased 30 percent to $195 million, or $0.20 per share, compared to net income of $150 million, or $0.15 per share, in the same period last year, excluding one-time charges for the acquisitions of Treasury Services Corporation and Navio Communications, Inc. Giving effect to the one-time charges, net income for the previous period was $8 million.

Revenue from Oracle's two businesses, database and applications, totaled $7.5 billion in the last four quarters. The database business, including database, tools and related services, grew 25 percent to $1.3 billion in revenues for the quarter and $5.6 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 37 percent to $0.5 billion in revenues for the first fiscal quarter and $2.0 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 first quarter grew by 19 percent versus the same period last year, led by strong growth in database products. Oracle's Education and Consulting services revenue increased 48 percent during the quarter, indicating continued strong demand for both businesses.

Oracle Americas led revenue growth by geographic region, up 37 percent, followed by EMEA (Europe, Middle East and Africa), up 33 percent (34 percent in local currencies), versus the same period last year. Asia Pacific was down 14 percent in reported dollars (up 7 percent in local currencies) versus the same period last year, reflecting continuing weak economic conditions in Asia Pacific.

Oracle made a number of significant announcements during the quarter:

  • * Oracle announced the full availability of Oracle(R) Application Server 4.0, delivering the first comprehensive and open platform to customers enabling enterprise application features for multi-tier Internet Computing. New Java features make the server 100 percent Java programmable, enabling organizations to deploy and manage all of their applications on a standard server platform, rather than on hundreds or thousands of desktop PCs.
  • * Oracle announced key executive appointments to further extend its focus and capabilities in both its applications and database businesses. George Roberts, senior vice president and an eight year Oracle veteran, was appointed to lead database and related product sales in the U.S. and Canada. Peter Dunning, who recently joined from SAP, was named to lead Oracle's North American applications sales. Edward Sanderson, senior vice president of Americas Consulting, expanded his responsibilities to include oversight of Latin America's overall business. * Oracle broadened its Front Office applications solution by announcing the signing of an agreement to acquire Versatility Inc., a leading vendor of computer telephony integration (CTI)-enabled customer interaction software. The Versatility product series complements Oracle's inbound service call center solution with outbound telesales and telemarketing functionality. Versatility will also bring a strong customer base in the telecommunications and financial services sector as well as experienced sales and professional service capabilities. The acquisition, which will be accounted for as a cash purchase transaction valued at approximately $12 million, is estimated to close by the end of the calendar year. * Oracle Applications(R) was selected as the 1998 ERP/MRP "Product of the Year" by the readers of Managing Automation, a leading manufacturing publication. The awards are based solely on votes from the monthly magazine's subscribers, as the readership of more than 100,000 casts ballots for their favorite software products in a variety of categories including ERP/MRP. Oracle is the only major ERP vendor to offer applications to meet the specific needs of both the discrete and process manufacturing industries. * Oracle announced strategic marketing and technology relationships with the world's top four Linux vendors, Red Hat Software, VA Research, SuSE, and Pacific HiTech. The availability of Oracle8 and Oracle Applications on Linux will enable current Linux users to deploy enterprise-class applications with unparalleled performance at the lowest possible cost. Linux is an open UNIX operating system that is available for download from the Internet at no charge and is a strong leader in the Internet service provider (ISP) market. It is also the fastest growing UNIX platform in the enterprise market with an estimated 7 million users, according to Linux Online. * Oracle announced Y2K solutions for new mid-sized and Fortune 1000 customers. For mid-sized companies, Oracle is offering FastForward Financials Y2K, a fixed-price solution that includes financial accounting software, consulting, education and support. Several customers including Impac Hotels, Propeller, Inc., Rhythms NetConnections and 1-800-FLOWERS have already implemented Oracle Y2K compliant financial accounting systems in less than 60 days.

"This was a critical transition quarter for us that tested a more focused and productive organization," said Ray Lane, Oracle's President and Chief Operating Officer. "We continued to grow in the database business with outstanding results in the U.S. and Europe, we really focused our applications business and achieved several significant competitive wins, and our services business continues to set new records ... all around, a quarter that exceeded our expectations."

"The phenomenal growth of the Internet is driving demand for our database technology," said Lawrence J. Ellison, Oracle's Chairman and CEO. "Today, Oracle is the foundation of every popular Internet site from Amazon.com to Yahoo!"

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 $7.5 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)

                                                                      1st
                                        1st Quarter Ended           Quarter
                                           August 31,                1997
                                       ------------------          Excluding
                                                                  Acquisition
                                      1998            1997        Charges (a)
                                      ----            ----         --------
    REVENUES
     Licenses and other            $  582,464     $  530,642     $  530,642
     Services                       1,166,646        838,187        838,187
                                    ---------      ---------      ---------
       Total Revenues               1,749,110      1,368,829      1,368,829
                                    ---------      ---------      ---------

    OPERATING EXPENSES
     Sales and marketing              510,076        449,451        449,451
     Cost of services                 679,290        468,167        468,167
     Research and development (b)     187,623        159,667        159,667
     General and administrative        94,284         75,514         75,514
     Acquired in-process
      research and development (a) $       --        167,054     $       --
                                    ---------      ---------      ---------
       Total Operating Expenses     1,471,273      1,319,853      1,152,799
                                    ---------      ---------      ---------

    OPERATING INCOME                  277,837         48,976        216,030

    Other income (expense) (a)         22,166         39,974         14,248
                                    ---------      ---------      ---------
    INCOME BEFORE TAXES               300,003         88,950        230,278

    Provision for income taxes        105,001         80,479         80,479
                                    ---------      ---------      ---------

    NET INCOME (a)                 $  195,002     $    8,471     $  149,799
                                    ---------      ---------      ---------
                                    ---------      ---------      ---------

    EARNINGS PER SHARE (a)
     Basic                         $     0.20     $     0.01     $     0.15
     Diluted                       $     0.20     $     0.01     $     0.15

    Shares Outstanding
     Basic                            972,894        979,285        979,285
     Diluted                          989,149      1,006,266      1,006,266

    (a)  Acquisition charges for the period ended August 31, 1997 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 quarter ended August 31, 1997 would have
         been $149,799 and $0.15 per share, respectively.
    (b)  In accordance with Statement of Financial Accounting Standards
         No. 86, $7,140 and $4,442 of software development costs were
         capitalized in the quarters ended August 31, 1998 and 1997,
         respectively.  Amortization of capitalized software development
         costs were $7,321 and $4,485 in the quarters ended August 31, 1998
         and 1997, respectively.

                              ORACLE CORPORATION

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               ($ in thousands)

                                             August 31,         May 31,
                                                1998             1998
                                            (unaudited)

    ASSETS

    Current Assets
     Cash and short term investments        $ 2,301,896      $ 1,919,199
     Trade receivables, net                   1,351,416        1,857,480
     Prepaid and refundable income taxes        254,615          260,624
     Other current assets                       226,449          285,747
                                              ---------        ---------
       Total Current Assets                   4,134,376        4,323,050
                                              ---------        ---------

    Long-term cash investments                  196,935          186,511
    Property and equipment, net                 952,849          934,350
    Computer software development costs, net     98,832           99,012
    Other assets                                308,471          276,088
                                              ---------        ---------

    TOTAL ASSETS                            $ 5,691,463      $ 5,819,011
                                              ---------        ---------
                                              ---------        ---------

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
     Notes payable, including
      current maturities                    $     3,600      $     2,924
     Accounts payable                           246,004          239,698
     Income taxes                               116,614          181,354
     Customer advances and unearned revenues    956,370          877,087
     Other current liabilities                  912,177        1,183,102
                                              ---------        ---------
       Total Current Liabilities              2,234,765        2,484,165
                                              ---------        ---------

    Long-term debt                              304,204          304,337

    Long-term liabilities                        55,727           57,095

    Deferred income taxes                        15,568           15,856

    Stockholders' equity                      3,081,199        2,957,558
                                              ---------        ---------

    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                   $ 5,691,463      $ 5,819,011
                                              ---------        ---------
                                              ---------        ---------

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