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Financial News Details

Oracle Reports Q4 Earnings per Share of $0.14 Excluding Investment Impairment Charge; GAAP EPS of $0.12

June 18, 2002

Redwood Shores, Calif. 18-JUN-2002 06:00 AM Today, Oracle Corporation announced financial results for its fiscal fourth quarter and full year 2002.

Fourth quarter net income was $760 million, or $0.14 per share excluding an impairment charge related to Oracle's investment in Liberate Technologies. This compares to net income of $0.15 per share a year ago. Including this charge, net income on a GAAP basis was $656 million, or $0.12 per share. Operating margin in the quarter reached a record 44% versus 39% in the fourth quarter of 2001.

Fourth quarter revenue was $2.8 billion. New software license sales were $1.15 billion while software license update sales were $643 million. Product support revenue was $385 million, consulting revenue was $487 million, and education and other revenue was $109 million.

For the full fiscal year 2002, revenue was $9.7 billion, while net income and earnings per share excluding the impairment charge were $2.3 billion, and $0.41, respectively. Including the charge, net income on a GAAP basis was $2.2 billion, and earnings per share were $0.39. This compares to $11 billion in revenue and $2.6 billion in net income, or $0.44 per share, for fiscal year 2001. The annual operating margin was a record 37%, compared to the previous historical high of 35% in the prior fiscal year.

"The true test of a management team is how well it performs in tough times," said Oracle CFO Jeff Henley. "During the worst technology recession I've seen in more than 20 years, Oracle's operating income margins increased to record levels and our operating income declined only 6% this fiscal year. This management team proved it can preserve profits even when times are tough."

"Database is the foundation of our software business and our database market position has never been stronger," said Oracle CEO Larry Ellison. "The latest database user surveys confirm that Oracle is the database used with 72% to 81% of enterprise applications among Fortune 100 companies. In addition, Oracle remains the overwhelming choice of users for future development, being four times more popular than IBM's DB2. With this huge lead in usage intentions the Oracle database should continue to gain market share in the years to come."

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) The slow economic recovery 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 terrorist attacks upon the United States 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, eBusiness 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

                (amounts in thousands, except per share data)

                                 Three Months Ended       Twelve Months Ended
                                      May 31,                  May 31,
                                 ------------------       ------------------

                                  2002       2001         2002       2001
                                  ----       ----         ----       ----

    REVENUES
      Licenses and other       $1,172,620  $1,656,238  $3,512,954  $4,706,797
      Services (1)              1,601,161   1,633,992   6,159,639   6,253,895

                               ----------  ----------  ----------  ----------
        Total revenues          2,773,781   3,290,230   9,672,593  10,960,692
                               ----------  ----------  ----------  ----------

    OPERATING EXPENSES
      Sales and marketing         587,532     811,888   2,208,981   2,691,322
      Cost of services (1)        568,244     744,896   2,405,511   2,897,060

      Research and development    282,142     319,829   1,076,156   1,138,591
      General and administrative  109,592     118,691     411,213     456,628
                               ----------  ----------  ----------  ----------
        Total operating
         expenses               1,547,510   1,995,304   6,101,861   7,183,601
                               ----------  ----------  ----------  ----------

    OPERATING INCOME            1,226,271   1,294,926   3,570,732   3,777,091


      Net investment gains
       (losses) related to
       equity securities (2)     (229,316)      3,385    (243,515)    (17,087)
      Other income (loss), net     (1,188)     27,364      80,987     211,226
                               ----------  ----------  ----------  ----------

    INCOME BEFORE TAXES           995,767   1,325,675   3,408,204   3,971,230


      Provision for income taxes  339,846     470,781   1,184,199   1,410,134
                               ----------  ----------  ----------  ----------
    NET INCOME                   $655,921    $854,894  $2,224,005  $2,561,096
                               ==========  ==========  ==========  ==========
    EARNINGS PER SHARE
      Basic                         $0.12       $0.15       $0.40       $0.46
      Diluted                       $0.12       $0.15       $0.39       $0.44

    WEIGHTED SHARES OUTSTANDING
      Basic                     5,471,617   5,602,590   5,518,024   5,596,721

      Diluted                   5,610,626   5,800,032   5,688,960   5,864,806

    -----------------------------------------
    (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 for the three months ending May 31, 2001, the twelve
        months ended May 31, 2001, and the nine months ended February 28, 2002
        were $26,346, $101,020 and $70,089, respectively.

    (2) Net investment gains (losses) related to equity securities in the
        quarter ended May 31, 2002 of $229,316 include a $173,452 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 $409,227,
        respectively, and net income and diluted earnings per share would have
        been $759,992 and $0.14, respectively.  For the year ended May 31,

        2002, the effective income tax rate and provision for income taxes
        would have been 35% and $1,253,580, respectively, and net income and
        diluted earnings per share would have been $2,328,076 and $0.41,
        respectively.


                              ORACLE CORPORATION

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                        Percentage of Revenues         Percentage Change
                     ---------------------------   ---------------------------
                                                                 Twelve Months

                                                                    FY02
                     Three Months     Twelve Months    Q4 FY02       vs.
                       Ended             Ended           vs.     Twelve Months
                      May 31,           May 31,        Q4 FY01      FY01
                    -------------    -------------     -------     -------
                    2002     2001    2002     2001
                    ----     ----    ----     ----


    REVENUES
      Licenses and
       other         42.3%    50.3%   36.3%    42.9%    (29.2%)     (25.4%)
      Services       57.7%    49.7%   63.7%    57.1%     (2.0%)      (1.5%)
                    ------   ------  ------   ------

        Total
         revenues   100.0%   100.0%  100.0%   100.0%    (15.7%)     (11.8%)
                    ------   ------  ------   ------

    OPERATING EXPENSES
      Sales and
       marketing     21.2%    24.7%   22.8%    24.6%    (27.6%)     (17.9%)
      Cost of
       services      20.5%    22.6%   24.9%    26.4%    (23.7%)     (17.0%)
      Research and
       development   10.2%     9.7%   11.1%    10.4%    (11.8%)      (5.5%)
      General and
       administrative 4.0%     3.6%    4.3%     4.2%     (7.7%)      (9.9%)
                    ------   ------  ------   ------


        Total
         operating
         expenses    55.8%    60.6%   63.1%    65.5%    (22.4%)     (15.1%)
                    ------   ------  ------   ------
    OPERATING INCOME 44.2%    39.4%   36.9%    34.5%     (5.3%)      (5.5%)

      Net investment
       gains (losses)
       related to
       equity
       securities    (8.3%)    0.1%   (2.5%)   (0.2%)       nm          nm
      Other income
       (loss), net    0.0%     0.8%    0.8%     1.9%   (104.3%)     (61.7%)
                    ------   ------  ------   ------
    INCOME BEFORE
     TAXES           35.9%    40.3%   35.2%    36.2%    (24.9%)     (14.2%)


      Provision for
       income taxes  12.3%    14.3%   12.2%    12.9%    (27.8%)     (16.0%)
                    ------   ------  ------   ------
    NET INCOME       23.6%    26.0%   23.0%    23.4%    (23.3%)     (13.2%)
                    ======   ======  ======   ======


                              ORACLE CORPORATION

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               ($ in thousands)

                                                         May 31,     May 31,
                                                          2002        2001
                                                          ----        ----


    ASSETS

    Current Assets
      Cash and short term investments                  $5,841,178  $5,887,661
      Trade receivables, net                            2,034,996   2,432,131
      Prepaid and refundable income taxes                 451,994     272,742
      Other current assets                                399,776     370,616
                                                      ----------- -----------

        Total Current Assets                            8,727,944   8,963,150
                                                      ----------- -----------

    Long-term cash investments                            405,883          --
    Property and equipment, net                           986,970     974,751
    Prepaid taxes                                         233,359     376,030
    Other assets                                          446,206     716,229
                                                      ----------- -----------


    TOTAL ASSETS                                      $10,800,362 $11,030,160
                                                      =========== ===========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities
      Notes payable, including current maturities            $450      $2,849
      Accounts payable                                    226,943     270,112
      Income taxes                                      1,091,293     767,087
      Customer advances and unearned revenues           1,275,627   1,213,529
      Other current liabilities                         1,365,504   1,663,042
                                                      -----------  ----------

        Total Current Liabilities                       3,959,817   3,916,619
                                                      -----------  ----------

    Long-term debt                                        298,391     300,847
    Deferred income taxes                                 204,073     327,788
    Other long-term liabilities                           220,791     207,135

    Stockholders' equity                                6,117,290   6,277,771
                                                      -----------  ----------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $10,800,362 $11,030,160
                                                      ===========  ==========

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