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Financial News Details

Oracle Reports Fiscal Q2 Earnings Per Share of $0.12; Applications New License Sales Up 27%; Database New License Sales Up 11%

December 15, 2003

Redwood Shores, Calif., December 15, 200

Today, Oracle Corporation announced that second quarter revenues were up 8% to $2.5 billion while net income grew 15% to $617 million as compared to the second quarter last year.

Earnings per share were $0.12 compared with $0.10 last year. New software license sales were up 13% to $849 million, while software license updates and product support revenues were up 17% to $1,114 million. Second quarter operating margin was 37%, a 300 basis point improvement over last year. Operating cash flow in the first half of the fiscal year was $1.6 billion.

“We are extremely pleased with the strong performance we saw this quarter. Solid execution in the field, a strengthening competitive position, and an improving economy contributed to results that were above expectations. The growth was also balanced. All major software product categories and geographic regions posted growth.” said Oracle CFO Jeff Henley.

“Our applications growth of 27% exceeded the growth rates of many of our competitors, including SAP, PeopleSoft, Lawson, and Siebel, in their most recently reported quarters. For example, new license sales at the combined PeopleSoft and JD Edwards

company declined 18% as compared to their results when they were operating as separate companies,” said Oracle CEO Larry Ellison. “But the very fastest growing part of our applications business is outsourcing, which increased 82% in the quarter.”

“Our database technology business depends on our ability to innovate. In the next few weeks we will complete delivery of Oracle 10g, the first database and application server designed to run on a Grid of low cost computers. Grid technology improves performance and reliability while dramatically lowering the cost of computing infrastructure. That’s the kind of innovation that customers find compelling.”

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 www.oracle.com/investor.

"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, political and market conditions could adversely affect purchasing decisions for computer software and services throughout the world. Although there are signs of an improving economic environment in the US, it is too early to determine whether an economic recovery will be broad, substantial and sustained, and whether any such recovery would translate into higher levels of IT spending. The war on terrorism and the potential for other hostilities in various parts of the world continues to contribute to a climate of uncertainty that could adversely affect revenues. 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. 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 continues to introduce new or enhanced versions of its products and services, such as Oracle Database 10g, Oracle Application Server 10g, Oracle 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 periodically 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/investor.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

 

November 30,

 

REVENUES

 

2003

 

 

2002

 

 

2003

 

 

2002

 

 

 

 

 

 

 

 

 

 

 

New software licenses and other

$

855

$

765

$

1,380

$

1,328

Software license updates and product support

 

1,114

 

 

954

 

 

2,148

 

 

1,859

Services

 

529

 

 

590

 

 

1,042

 

 

1,149

Total Revenues

 

2,498

 

 

2,309

 

 

4,570

 

 

4,336

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

525

 

 

512

 

 

989

 

 

984

Software license updates and product support

 

143

 

 

117

 

 

264

 

 

234

Cost of services

 

455

 

 

482

 

 

897

 

 

953

Research and development

 

323

 

 

295

 

 

621

 

 

581

General and administrative (1)

 

137

 

 

109

 

 

268

 

 

211

Total Operating Expenses

 

1,583

 

 

1,515

 

 

3,039

 

 

2,963

OPERATING INCOME

 

915

 

 

794

 

 

1,531

 

 

1,373

Net investment gains (losses) related to equity securities (2)

 

(4)

 

 

(22)

 

 

32

 

 

(102)

Other income, net (3)

 

5

 

 

28

 

 

17

 

 

51

INCOME BEFORE TAXES

 

916

 

 

800

 

 

1,580

 

 

1,322

Provision for income taxes

 

299

 

 

265

 

 

523

 

 

444

NET INCOME

$

617

$

535

$

1,057

$

878

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.12

$

0.10

$

0.20

$

0.16

Diluted

$

0.12

$

0.10

$

0.20

$

0.16

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

5,226

 

 

5,309

 

 

5,228

 

 

5,354

Diluted

 

5,337

 

 

5,420

 

 

5,342

 

 

5,468

(1)General and administrative expenses for the three and six months ended November 30, 2003 include $13.8 million and $28.4 million of professional fees associated with our tender offer for PeopleSoft, Inc.

(2)Net investment gains (losses) related to equity securities for the three and six months ended November 30, 2002 include $15.0 million and $87.1 million of impairment charges related to Oracle’s investment in Liberate Technologies. In June 2003, we sold all of our common shares in Liberate Technologies to a third-party for approximately $83.5 million and recognized a $35.4 million gain on the sale.

(3)Other income, net for the six months ended November 30, 2003 includes $5.0 million relating to a commitment fee for a revolving credit facility associated with our tender offer for PeopleSoft, Inc.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DATA

 

Percentage of Revenues

 

Percentage of Revenues

 

Percentage Change

 

Percentage Change

 

Three Months

 

Six Months

 

Three Months FY04

 

Six Months FY04

 

 

Ended

 

 

Ended

 

vs.

 

vs.

 

November 30,

 

November 30,

 

Three Months FY03

 

Six Months FY03

REVENUES

2003

2002

 

2003

2002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New software licenses and other

34%

33%

30%

31%

12%

4%

Software license updates and product support

45%

41%

47%

43%

17%

16%

Services

21%

 

 

26%

 

23%

 

 

26%

(10%)

(9%)

Total Revenues

100%

100%

100%

100%

8%

5%

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

21%

22%

22%

24%

3%

1%

Software license updates and product support

6%

5%

6%

5%

22%

13%

Cost of services

18%

21%

19%

22%

(6%)

(6%)

Research and development

13%

13%

14%

13%

9%

7%

General and administrative

5%

 

 

5%

 

6%

 

 

5%

26%

27%

Total Operating Expenses

63%

 

 

66%

 

67%

 

 

69%

4%

3%

OPERATING INCOME

37%

34%

33%

31%

15%

12%

Net investment gains (losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

related to equity securities

0%

(1%)

1%

(2%)

*

*

Other income, net

0%

 

 

1%

 

0%

 

 

1%

*

*

INCOME BEFORE TAXES

37%

34%

34%

30%

15%

20%

Provision for income taxes

12%

11%

11%

10%

13%

18%

NET INCOME

25%

 

 

23%

 

23%

 

 

20%

15%

20%

* not meaningful

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions)

 

 

November 30,

 

 

May 31,

 

 

2003

 

 

2003

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

4,173

$

4,737

Short-term investments

 

3,901

 

 

1,782

Trade receivables, net

 

1,547

 

 

1,920

Deferred tax assets

 

361

 

 

381

Other current assets

 

325

 

 

407

Total Current Assets

 

10,307

 

 

9,227

Investments in debt securities

 

-

 

 

233

Property, net

 

1,073

 

 

1,062

Deferred tax assets

 

162

 

 

197

Intangible and other assets

 

235

 

 

345

TOTAL ASSETS

$

11,777

$

11,064

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Current portion of long-term debt

$

152

$

153

Accounts payable

 

212

 

 

228

Income taxes payable

 

958

 

 

891

Other current liabilities

 

1,327

 

 

1,477

Deferred revenues

 

1,349

 

 

1,409

Total Current Liabilities

 

3,998

 

 

4,158

Long-term debt

 

169

 

 

175

Deferred tax liabilities

 

151

 

 

186

Other long-term liabilities

 

260

 

 

225

Stockholders' equity

 

7,199

 

 

6,320

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

11,777

$

11,064

 

 

 

 

 

 

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions)

Six Months Ended

November 30,

 

 

2003

 

 

2002

Cash Flows From Operating Activities:

 

 

 

 

 

Net income

$

1,057

$

878

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

100

 

 

122

Amortization of intangible assets

 

21

 

 

44

Net investment (gains) losses related to equity securities

 

(32)

 

 

102

Deferred income taxes

 

20

 

 

(35)

Changes in assets and liabilities:

 

 

 

 

 

Decrease in trade receivables

 

389

 

 

528

Decrease in other assets

 

93

 

 

86

Decrease in accounts payable and other current liabilities

 

(139)

 

 

(95)

Increase (decrease) in income taxes payable

 

135

 

 

(140)

Decrease in deferred revenues

 

(54)

 

 

(13)

Increase (decrease) in other long-term liabilities

 

10

 

 

(8)

Net cash provided by operating activities

 

1,600

 

 

1,469

Cash Flows From Investing Activities:

 

 

 

 

 

Purchases of investments

 

(5,252)

 

 

(2,299)

Proceeds from maturities and sale of investments

 

3,397

 

 

2,574

Capital expenditures

 

(103)

 

 

(75)

Increase in other assets

 

(21)

 

 

(68)

Net cash provided by (used for) investing activities

 

(1,979)

 

 

132

Cash Flows From Financing Activities:

 

 

 

 

 

Payments for repurchase of common stock

 

(399)

 

 

(1,707)

Proceeds from issuance of common stock

 

176

 

 

147

Settlement of forward contract

 

-

 

 

(166)

Net cash used for financing activities

 

(223)

 

 

(1,726)

Effect of exchange rate changes on cash and cash equivalents

 

38

 

 

43

Net decrease in cash and cash equivalents

 

(564)

 

 

(82)

Cash and cash equivalents at beginning of period

 

4,737

 

 

3,095

Cash and cash equivalents at end of period

$

4,173

 

$

3,013

 

 

 

 

 

 

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