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Financial News Details

Oracle Reports Q1 Earnings per share of $0.07 Excluding Investment Impairment Charge; GAAP EPS of $0.06

September 17, 2002

Redwood Shores, CA 17-SEP-2002 12:20 PM Today, Oracle Corporation announced first quarter revenue of $2.0 billion and net income of $386 million or $0.07 per share excluding an impairment charge related to Oracle's investment in Liberate Technologies. This compares to net income of $511 million, or $0.09 per share a year ago. Including this charge, net income on a GAAP basis was $343 million, or $0.06 per share. New software license and license updates revenues were $1.2 billion, down 9%. New software license sales were $549 million, down 23% while software license update revenues were $620 million, up 9%. Product support revenue was $349 million, consulting revenue was $432 million, and education revenue was $63 million. First quarter operating margin was 29% versus 33% last year.

"The true sign of the underlying strength of our business is that even in these difficult economic times Oracle's operating cash flow remains strong and our profitability remains at high levels," said Oracle CFO Jeff Henley. "Our installed base of customers continues to grow and as a result our revenues from license update rights and support continue to grow. In addition we are continuing the multi-billion dollar stock buy back we have had in place for the past few years."

"We are pleased by the continued adoption of the Oracle database and the rapid increase in market share," said Oracle CEO Larry Ellison. "According to AMR Research's recent report, Oracle increased its database share under enterprise applications for the second year in a row. The report shows that Oracle increased its share by 4% from 2000 to 2001, while IBM DB2 declined by 4% and Microsoft SQL Server market share remained flat. This was consistent with Morgan Stanley's CIO survey in June 2002 showing Oracle as the Strategic Database Standard 64% of the time, with IBM DB2 only 15% of the time. In addition, Oracle has the highest user loyalty with far more customers moving to it than either Microsoft or IBM."

Oracle expects to file its Form 10-Q for the first quarter within the next several days, well ahead of the SEC's new accelerated deadline for filing quarterly reports. Oracle continues to expand its financial reporting to inform investors in a more complete and timely manner, consistent with the SEC's new emphasis on continuous disclosure. We will make our periodic reports available on the Investor Relations website at http://www.oracle.com.

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, such as Oracle 9i Database, Oracle 9iAS Application Server, E-Business Suite, Oracle Collaboration Suite and application hosting services; the market acceptance and contribution to Oracle's revenues of these new versions or products cannot be assured. (4) Oracle has made changes to its pricing model, which could lead to a decline or delay in sales as its sales force and customers adjust to the new pricing policies. 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

                                                            August 31,
                                                    -------------------------

                                                        2002         2001
                                                        ----         ----

    REVENUES
      Licenses and other                              $563,034      $731,432
      Services (1)                                   1,464,514     1,533,623
                                                    -----------   -----------
        Total Revenues                               2,027,548     2,265,055

                                                    -----------   -----------
    OPERATING EXPENSES
      Sales and marketing                              471,267       535,481
      Cost of services (1)                             589,292       632,883
      Research and development                         286,079       253,299
      General and administrative                       101,794        97,614
                                                    -----------   -----------
        Total Operating Expenses                     1,448,432     1,519,277
                                                    -----------   -----------
    OPERATING INCOME                                   579,116       745,778

      Net investment losses related to equity

       securities (2)                                  (80,571)       (3,301)
      Other income, net                                 23,179        43,134
                                                    -----------   -----------

    INCOME BEFORE TAXES                                521,724       785,611

      Provision for income taxes                       178,996       274,964
                                                    -----------   -----------
    NET INCOME                                        $342,728      $510,647
                                                    ===========   ===========
    EARNINGS PER SHARE
      Basic                                              $0.06         $0.09
      Diluted                                            $0.06         $0.09


    SHARES OUTSTANDING
      Basic                                          5,398,818     5,579,811
      Diluted                                        5,514,980     5,780,020

    ----------------------------------------------------
    (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").  EITF 01-14 requires reimbursements
        received for out-of-pocket expenses to 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

        "Cost of Services."  Reimbursable out-of-pocket expenses reclassified
        as revenues in the three months ended August 31, 2001 were $23,010.

    (2) Net investment losses related to equity securities in the three months
        ended August 31, 2002 of $80,571 include a $72,144 impairment charge
        related to Oracle's investment in Liberate Technologies. Excluding the
        effect of this charge, the effective income tax rate and provision for
        income taxes would have been 35% and $207,853, respectively, and net
        income and fully diluted earnings per share would have been $386,015
        and $0.07, respectively.


                              ORACLE CORPORATION

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (unaudited)

                                Percentage of Revenues   Percentage Change
                                ---------------------- ----------------------
                                    Three Months         Three Months FY03
                                        Ended                   vs.
                                      August 31,         Three Months FY02
                                ----------------------  ----------------------
                                    2002    2001
                                    ----    ----

    REVENUES
      Licenses and other            28%      32%                (23%)
      Services                      72%      68%                 (5%)
                                 ------   ------
        Total Revenues             100%     100%                (10%)

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

    OPERATING EXPENSES
      Sales and marketing           23%      24%                (12%)
      Cost of services              29%      28%                 (7%)
      Research and development      14%      11%                 13%
      General and administrative     5%       4%                  4%
                                 ------   ------
        Total Operating Expenses    71%      67%                 (5%)
                                 ------   ------

    OPERATING INCOME                29%      33%                (22%)

      Net investment losses related
       to equity securities         (4%)      0%                  nm
      Other income, net              1%       2%                (46%)
                                 ------   ------


    INCOME BEFORE TAXES             26%      35%                (34%)

      Provision for income taxes     9%      12%                (35%)
                                 ------   ------

    NET INCOME                      17%      23%                (33%)
                                 ======   ======


                              ORACLE CORPORATION

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               ($ in thousands)

                                                   August 31       May 31,
                                                     2002           2002
                                                  -----------    -----------

                                                  (unaudited)

    ASSETS

    Current Assets
      Cash and short term investments              $6,418,419     $5,841,178
      Trade receivables, net                        1,362,070      2,034,996
      Deferred tax assets                             448,369        451,994
      Other current assets                            315,464        399,776
                                                  ------------   ------------

        Total Current Assets                        8,544,322      8,727,944
                                                  ------------   ------------

    Long-term investments                             236,733        405,883
    Property, net                                     972,777        986,970
    Deferred tax assets                               242,745        233,359
    Intangible and other assets                       415,190        446,206
                                                  ------------   ------------


    TOTAL ASSETS                                  $10,411,767    $10,800,362
                                                  ============   ============

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities
      Notes payable and current maturities of
       long-term debt                                  $2,905           $450
      Accounts payable                                219,278        226,943
      Income taxes payable                          1,085,586      1,091,293
      Customer advances and unearned revenues       1,513,550      1,275,627
      Other current liabilities                     1,161,163      1,365,504
                                                  ------------    -----------

        Total Current Liabilities                   3,982,482      3,959,817
                                                  ------------    -----------

    Long-term debt                                    310,661        298,391
    Deferred tax liabilities                          174,524        204,073

    Other long-term liabilities                       208,665        220,791
    Stockholders' equity                            5,735,435      6,117,290
                                                  ------------   ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $10,411,767    $10,800,362
                                                 =============  =============


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

                                      Three Months Ended August 31, 2002
                                   ----------------------------------------
                                                 Adjustment for
                                                Impairment Charge
                                                   for Equity
                                   GAAP Basis     Investments    As Adjusted
                                  --------------------------------------------


    REVENUES
      Licenses and other            $563,034          $--          $563,034
      Services                     1,464,514           --         1,464,514
                                  --------------------------------------------
        Total Revenues             2,027,548           --         2,027,548

    OPERATING EXPENSES
      Sales and marketing            471,267           --           471,267
      Cost of services               589,292           --           589,292
      Research and development       286,079           --           286,079
      General and administrative     101,794           --           101,794
                                  --------------------------------------------
        Total Operating Expenses   1,448,432           --         1,448,432

    OPERATING INCOME                 579,116           --           579,116

      Net investment losses
       related to equity
       securities (1)                (80,571)      72,144            (8,427)
      Other income, net               23,179           --            23,179
    INCOME BEFORE TAXES              521,724       72,144           593,868
                                  --------------------------------------------

      Provision for income taxes     178,996       28,857           207,853
                                  ============================================
    NET INCOME                      $342,728      $43,287          $386,015

    EARNINGS PER SHARE
      Basic                            $0.06        $0.01             $0.07
      Diluted                          $0.06        $0.01             $0.07

    (1) Net investment losses related to equity securities in the three months
        ended August 31, 2002 of $80,571 include a $72,144 impairment charge
        related to Oracle's investment in Liberate Technologies.  Excluding
        the effect of this charge, the effective income tax rate would have
        been 35%.

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