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Financial News Details

Oracle Q2 Earnings 10 Cents per share; Q2 Operating margin is 34%

December 18, 2002

Q2 Operating margin is 34%

Redwood Shores Calif. 18-DEC-2002 06:00 AM Today, Oracle Corporation announced second quarter revenue of $2.31 billion and net income of $535 million or $0.10 per share. This compares to $2.38 billion in revenue and net income of $549 million and $0.10 per share a year ago. License revenues were $765 million, down 7%, while License updates and product support revenues were $954 million, up 8%. Services revenues were $590 million, down 11%. Second quarter operating margin was 34%, equal to last year.

"Even during an economic downturn Oracle's installed base of customers continues to grow, so our revenues from license update rights continue to rise. That's the underlying strength in our business model. That's what allows us to maintain our profitability at high levels even though we increased research and development spending by 15%," said Oracle CFO Jeff Henley.

"We're pleased that our database business started to grow again this quarter," said Oracle CEO Larry Ellison. "We have never been in a stronger position relative to our competitors. Morgan Stanley's December 2002 Enterprise Software Survey asked CIOs to name their preferred database: 54% chose Oracle, Microsoft was second at 26%, and IBM was a distant third at 9%. This survey shows that Oracle is preferred by more than 2 to 1 over Microsoft, and fully 6 to 1 over IBM."

Oracle is the world's largest enterprise software company. For more information about Oracle, including supplemental financial information, please call Investor Relations at (650) 506-4073 or visit Oracle on the web at http://www.oracle.com.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 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) Economic conditions will continue to adversely affect purchasing decisions for computer software and services throughout the world. Delays in closing of sales, reductions in size of individual sales without an offsetting increase in volume or delays in product delivery can cause quarterly revenues and income to fall significantly short of anticipated levels. (2) Management's ability to forecast revenues and control expenses, especially on a quarterly basis, continues to be a challenge. The economic, political and other uncertainties caused (or exacerbated) by the war on terrorism add to this challenge. An unexpected decline in revenues without a corresponding and timely slowdown in expense growth could have a material adverse effect on results of operations (3) Oracle is introducing new or revised versions of its products and services, such as Oracle 9i Database, Oracle 9iAS Application Server, E-Business Suite, Oracle Collaboration Suite and Outsourcing; the market acceptance and contribution to Oracle's revenues of these new versions or products and services cannot be assured. (4) Oracle has made changes to its pricing model and sales organization, which could lead to a decline or delay in sales as its sales force and customers adjust to the new pricing policies and organizational changes. Intense competition in the various markets in which Oracle competes may also put pressure on Oracle to reduce prices on certain products. (5) 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. 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.

                              ORACLE CORPORATION

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

                                Three Months Ended        Six Months Ended
                                    November 30,            November 30,

                                ------------------        -----------------

                                  2002       2001        2002         2001
                                  ----       ----        ----         ----
    REVENUES
      Licenses and other        $764,887   $819,324   $1,327,921   $1,550,756
      License updates and
       product support (1)       953,622    881,135    1,858,717    1,724,300
      Services (1), (2)          589,999    679,978    1,149,418    1,370,436
                              ---------- ----------   ----------   ----------
        Total Revenues         2,308,508  2,380,437    4,336,056    4,645,492
                              ---------- ----------   ----------   ----------

    OPERATING EXPENSES
      Sales and marketing        512,327    571,152      983,594    1,106,633
      Licenses updates and
       product support           117,377    116,676      234,358      233,235
      Services (1)               480,619    516,264      952,929    1,032,588
      Research and development   295,331    257,484      581,410      510,783
      General and administrative 108,913     98,917      210,708      196,531
                              ---------- ----------   ----------   ----------
        Total Operating
         Expenses              1,514,567  1,560,493    2,962,999    3,079,770
                              ---------- ----------   ----------   ----------

    OPERATING INCOME             793,941    819,944    1,373,057    1,565,722


      Net investment losses
       related to equity
       securities (3)            (21,849)    (3,388)    (102,420)      (6,689)
      Other income, net           27,947     28,770       51,126       71,904
                              ---------- ----------   ----------   ----------
    INCOME BEFORE TAXES          800,039    845,326    1,321,763    1,630,937

      Provision for income
       taxes (4)                 265,173    295,864      444,169      570,828
                              ---------- ----------   ----------   ----------
    NET INCOME                  $534,866   $549,462     $877,594   $1,060,109
                              ========== ==========   ==========   ==========
    EARNINGS PER SHARE

      Basic                         0.10       0.10         0.16         0.19
      Diluted                       0.10       0.10         0.16         0.18

    SHARES OUTSTANDING
      Basic                    5,308,868  5,528,372     5,353,843   5,554,092
      Diluted                  5,419,831  5,695,860     5,467,405   5,737,940

    -----------------------------------------------------------

    (1)  On March 1, 2002, Oracle adopted Financial Accounting Standards Board
         Emerging Issues Task Force No. 01-14, Income Statement
         Characterization of Reimbursements Received for 'Out-of-Pocket'
         Expenses Incurred.  EITF 01-14 requires reimbursements received for
         out-of-pocket expenses be reflected as revenues and to reclassify
         prior period financial statements to conform with the current period

         presentation.  Prior to the adoption of EITF 01-14, reimbursable out-
         of-pocket expenses were reflected as net amounts in "Services"
         expenses.  Reimbursable out-of-pocket expenses reclassified as
         revenues in the three months ended November 30, 2001 were $23,102.
         Reimbursable out-of-pocket expenses reclassified as revenues in the
         six months ended November 30, 2001 were $46,112.

    (2)  Services revenues include consulting, advanced product services and
         education.  Advanced product services was previously included in
         license updates and product support.

    (3)  Net investment losses related to equity securities in the three
         months ended November 30, 2002 of $21,849 include a $15,030
         impairment charge related to Oracle's investment in Liberate
         Technologies. Excluding the effect of the Liberate Technologies
         impairment charge, the effective income tax rate and provision for

         income taxes would have been 33.3% and $271,185, respectively, and
         net income and fully diluted earnings per share would have been
         $543,884 and $0.10, respectively. Net investment losses related to
         equity securities in the six months ended November 30, 2002 of
         $102,420 include an $87,174 impairment charge related to Oracle's
         investment in Liberate Technologies. Excluding the effect of the
         Liberate Technologies impairment charge, the effective income tax
         rate and provision for income taxes would have been 34% and $479,038
         and net income and fully diluted earnings per share would have been
         $929,899 and $0.17.

    (4)  Provision for income taxes in the three months ended November 30,
         2002 of $265,173 includes a $5,939 cumulative catch-up adjustment
         related to a decrease in Oracle's effective income tax rate on
         operating and other income from 35% to 34%. Excluding the effect of
         this adjustment, the provision for income taxes would have been $
         271,112 and net income and fully diluted earnings per share would

         have been $528,927 and $0.10.


                              ORACLE CORPORATION

                  CONSOLIDATED STATEMENTS OF OPERATIONS DATA
                                 (unaudited)

                 Percentage of  Percentage of   Percentage        Percentage
                  Revenues       Revenues        Change            Change
                 -------------  -------------   ----------        ----------
                 Three Months   Six Months   Three Months FY03 Six Months FY03
                    Ended         Ended            vs.               vs.
                 November 30,   November 30, Three Months FY02 Six Months FY02
                 -------------  ------------ ----------------- ---------------
                 2002    2001   2002    2001
                 ----    ----   ----    ----


    REVENUES
      Licenses
       and other  33%     34%    31%    33%        (7%)             (14%)
      License
       updates
       and product
       support    41%     37%    43%    37%         8%                8%
      Services    26%     29%    26%    30%       (13%)             (16%)
                 ----    ----   ----   ----
        Total Rev-
         enues   100%    100%   100%   100%        (3%)              (7%)
                 ----    ----   ----   ----

    OPERATING EXPENSES
      Sales and
       marketing  22%     24%    24%    24%       (10%)             (11%)
      License
       updates
       and product

       support     5%      5%     5%     5%         0%                0%
      Services    21%     22%    22%    22%        (7%)              (8%)
      Research and
       develop-
       ment       13%     11%    13%    11%        15%               14%
      General and
       admini-
       strative    5%      4%     5%     4%        10%                7%
                 ----    ----   ----   ----
        Total
         Operating
         Expenses 66%     66%    69%    66%        (3%)              (4%)
                 ----    ----   ----   ----

    OPERATING
     INCOME       34%     34%    31%    34%        (3%)             (12%)

      Net investment
       losses related
       to equity

       securities (1%)     0%    (2%)    0%       545%             1431%
      Other income,
       net         1%      1%     1%     1%        (3%)             (29%)
                 ----    ----   ----   ----

    INCOME BEFORE
     TAXES        34%     35%    30%    35%        (5%)             (19%)

      Provision
       for income
       taxes      11%     12%    10%    12%       (10%)             (22%)
                 ----    ----   ----   ----

    NET INCOME    23%     23%    20%    23%        (3%)             (17%)
                 ====    ====   ====   ====


                              ORACLE CORPORATION
                      SUPPLEMENTAL ANALYSIS OF EFFECT OF
                   IMPAIRMENT CHARGE FOR EQUITY INVESTMENTS
              (unaudited, $ in thousands, except per share data)


                       Three Months Ended             Six Months Ended
                        November 30, 2002            November 30, 2002
                       ------------------            ------------------
                        Adjustment for                 Adjustment for
                          Impairment                    Impairment
                          Charge for                    Charge for
                           Liberate                      Liberate
                     GAAP   Tech-       As      GAAP       Tech-       As
                     Basis nologies  Adjusted   Basis    nologies    Adjusted
                     ---------------------------------------------------------

    REVENUES
      Licenses and
       other        $764,887     $--  $764,887 $1,327,921      $-- $1,327,921
      License updates
       and product
       support       953,622      --   953,622  1,858,717           1,858,717
      Services       589,999      --   589,999  1,149,418       --  1,149,418
                    ----------------------------------------------------------
        Total
         Revenues  2,308,508      -- 2,308,508  4,336,056       --  4,336,056


    OPERATING EXPENSES
      Sales and
       marketing     512,327      --   512,327    983,594       --    983,594
      License updates
       and product
       support       117,377      --   117,377    234,358             234,358
      Services       480,619      --   480,619    952,929       --    952,929
      Research and
       development   295,331      --   295,331    581,410       --    581,410
      General and
       admini-
       strative      108,913      --   108,913    210,708       --    210,708
                    ----------------------------------------------------------
        Total
         Operating
         Expenses 1,514,567       -- 1,514,567  2,962,999       --  2,962,999
    OPERATING
     INCOME         793,941       --   793,941  1,373,057       --  1,373,057

      Net investment
       losses related
       to equity sec-

       urities (1)  (21,849)  15,030    (6,819)  (102,420)   87,174   (15,246)
      Other income,
       net           27,947       --    27,947     51,126        --    51,126
                    ----------------------------------------------------------
    INCOME BEFORE
     TAXES          800,039   15,030   815,069  1,321,763    87,174 1,408,937

      Provision for
       income taxes 265,173    6,012   271,185    444,169    34,869   479,038
                    ----------------------------------------------------------
    NET INCOME     $534,866   $9,018  $543,884   $877,594   $52,305  $929,899
                    ==========================================================

    EARNINGS PER SHARE
      Basic           $0.10    $0.00     $0.10      $0.16     $0.01     $0.17
      Diluted         $0.10    $0.00     $0.10      $0.16     $0.01     $0.17
                    ----------------------------------------------------------

    (1)  Net investment losses related to equity securities in the three
         months ended November 30, 2002 of $21,849 include a $15,030
         impairment charge related to Oracle's investment in Liberate
         Technologies. Excluding the effect of the Liberate Technologies
         impairment charge, the effective income tax rate would have been
         33.3%.  Net investment losses related to equity securities in the six

         months ended November 30, 2002 of $102,420 include a $87,174
         impairment charge related to Oracle's investment in Liberate
         Technologies. Excluding the effect of the Liberate Technologies
         impairment charge, the effective income tax rate would have been
         34.0%.


                              ORACLE CORPORATION

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               ($ in thousands)

                                                    November 30,    May 31,
                                                        2002         2002
                                                    -----------  -----------
                                                    (unaudited)

    ASSETS

    Current Assets
      Cash, cash equivalents and short-term
       investments                                   $5,481,336    $5,841,178
      Trade receivables, net                          1,528,761     2,034,996
      Deferred tax assets                               447,448       451,994
      Other current assets                              330,533       399,776

                                                    -----------   -----------

        Total Current Assets                          7,788,078     8,727,944
                                                    -----------   -----------

    Long-term investments                               413,648       405,883
    Property, net                                       948,869       986,970
    Deferred tax assets                                 231,612       233,359
    Intangible and other assets                         369,766       446,206
                                                     ----------   -----------
    TOTAL ASSETS                                     $9,751,973   $10,800,362
                                                     ==========   ===========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities
      Accounts payable                                 $216,672      $227,393
      Income taxes payable                            1,011,631     1,091,293
      Other current liabilities                       1,282,745     1,399,660
      Deferred revenues                               1,248,307     1,241,471
                                                     ----------   -----------
        Total Current Liabilities                     3,759,355     3,959,817
                                                     ----------   -----------
    Long-term debt                                      312,543       298,391
    Deferred tax liabilities                            168,839       204,073
    Other long-term liabilities                         212,649       220,791

    Stockholders' equity                              5,298,587     6,117,290
                                                     ----------   -----------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $9,751,973   $10,800,362
                                                     ==========   ===========

                              ORACLE CORPORATION

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               ($ in thousands)
                                 (unaudited)

                                                         Six Months Ended
                                                            November 30,
                                                         -----------------
                                                         2002         2001
                                                         ----         ----
    Cash Flows From Operating Activities:
      Net income                                       $877,594    $1,060,109
      Adjustments to reconcile net income to net cash
       provided by operating activities:
        Depreciation                                    122,218       124,247
        Amortization of intangible assets                43,866        36,647
        Net investment losses related to equity
         securities                                     102,420         6,689
        Changes in assets and liabilities:
          Decrease in trade receivables                 528,147       616,247
          Decrease in prepaid expenses and other assets  85,847         4,667

          (Increase) decrease in tax related assets       9,428      (199,130)
          Decrease in accounts payable and accrued
           liabilities                                  (95,327)     (208,491)
          Increase (decrease) in tax related
           liabilities                                 (184,786)      188,154
          Increase (decrease) in deferred revenues      (12,623)     (126,848)
          Increase (decrease) in other long-term
           liabilities                                   (8,164)        7,364
                                                     -----------   -----------
      Net cash provided by operating activities       1,468,620     1,509,655
                                                     -----------   -----------
    Cash Flows From Investing Activities:
        Purchases of investments                     (2,464,610)   (3,503,483)
        Proceeds from sale of investments             2,740,190     1,878,883
        Capital expenditures                            (75,067)     (159,652)
        Increase in other assets                        (67,544)      (26,510)
                                                     -----------   -----------
      Net cash provided by (used for) investing
       activities                                       132,969    (1,810,762)
                                                     -----------   -----------
    Cash Flows From Financing Activities:
        Payments for repurchase of common stock      (1,707,168)   (1,857,865)
        Proceeds from issuance of common stock          147,019       189,287
        Settlement of forward contract                 (166,260)           --
        Payments under notes payable                         --        (1,742)
      Net cash used for financing activities         (1,726,409)   (1,670,320)
                                                     -----------   -----------
    Effect of exchange rate changes on cash and cash

     equivalents                                         42,607       (10,224)
                                                     -----------   -----------
      Net decrease in cash and cash equivalents         (82,213)   (1,981,651)
      Cash and cash equivalents at beginning of
       period                                         3,095,109     4,449,166
                                                     -----------   -----------
      Cash and cash equivalents at end of period     $3,012,896    $2,467,515
                                                     ===========   ===========

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