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Financial News Details

Oracle Reports Q1 GAAP EPS Up 28% To 13 Cents, Non-GAAP EPS Up 24% To 18 Cents

June 19, 2006

Applications New License Revenues Up 80%, Database and Middleware New License Revenues Up 15%

REDWOOD SHORES, Calif.,   September 19, 2006 01:25 PM

News Facts

Oracle Corporation (NASDAQ-GS: ORCL) today announced fiscal 2007 Q1 GAAP earnings per share were up 28% to $0.13, compared to the same quarter last year. First quarter total GAAP revenues were up 30% to $3.6 billion, while quarterly GAAP net income was up 29% to $670 million. Total GAAP software revenues were up 29% to $2.7 billion with database and middleware new license revenues up 15% and applications new license revenues up 80%. Services revenues were up 33% to $846 million, compared to the same quarter last year.

First quarter non-GAAP earnings per share were up 24% to $0.18, and non-GAAP net income was up 26% to $931 million, compared to the same quarter last year.

"We reported record revenues and earnings for the first quarter," said Oracle President and CFO, Safra Catz. "We exceeded our guidance on every metric and delivered strong revenue growth across all product lines and geographies. We are now in year three of our five year plan targeting EPS growth at 20% per year. We continue to deliver results comfortably ahead of target."

"We're rapidly taking applications market share from SAP," said Oracle President, Charles Phillips. "Q1 was the second consecutive quarter that Oracle's applications new license sales growth was 80% or more. That's ten times SAP's 8% new license sales growth rate in their most recently completed quarter."

"SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA)," said CEO, Larry Ellison. "They've just announced that they are delaying the next version of SAP applications until 2010. That's a full two years behind Oracle's scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP's slowing organic growth. These are major changes in direction for SAP."

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

"Safe Harbor" Statement: Statements in this presentation relating to Oracle's future plans and prospects are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions could adversely affect our revenue growth and profitability through reductions in IT budgets and expenditures. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases, or a decline in our renewal rates for software license updates and product support. (3) We cannot assure market acceptance of new products or new versions of existing products. (4) We have an active acquisition program, and our acquisitions may not be successful, may involve unanticipated costs or other integration issues, or may disrupt our existing operations. (5) Periodic changes to our pricing model and sales organization could temporarily disrupt operations and cause a decline or delay in sales. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions, and could require us to reduce prices. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this release is current as of the date of this presentation. Oracle undertakes no duty to update any statement in light of new information or future events.

For full financial tables visit:  http://www.oracle.com/investor

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the table, which exclude certain business combination accounting entries and expenses related to acquisitions as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effect:

-- Support deferred revenue: Business combination accounting rules require us to account for the fair value of support contracts assumed in connection with acquisitions. Because these are typically one-year contracts, our GAAP revenues for the one-year period subsequent to acquisitions do not reflect the full amount of revenue on assumed contracts that would have otherwise been recorded by the acquired entities. The non-GAAP adjustment is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on support contracts, although we cannot be sure that customers will renew these contracts.

-- Stock-based compensation: We adopted FASB Statement No. 123R, Share- Based Payments, on June 1, 2006 under the modified prospective method. Statement 123R requires us to record non-cash operating expenses associated with stock option awards at their estimated fair values. Prior to our Statement 123R adoption, we were required to record stock-based compensation expenses at intrinsic values, which were substantially related to options assumed from acquisitions. In accordance with the modified prospective method, our financial statements for prior periods have not been restated to reflect, and do not include, the changes in methodology to expense options at fair values in accordance with Statement 123R. Although stock-based compensation is a key incentive offered to our employees, and we believe it contributed to the revenue earned during the period and will contribute to our future revenue generation, we continue to evaluate our business performance excluding stock- based compensation expenses. Stock-based compensation expenses will recur in future periods.

-- Amortization of intangible assets: We have excluded the effect of amortization of intangibles from our non-GAAP net income. We believe this is useful because, prior to the PeopleSoft acquisition in the third quarter of fiscal 2005, we did not incur significant charges of this nature, and the exclusion of this amount helps investors understand a significant reason why our GAAP operating expenses increased in periods subsequent to the PeopleSoft acquisition. Investors should note that the use of intangible assets contributed to revenue earned during the period and will contribute to future revenue generation and should also note that these amortization expenses are recurring.

-- Acquisition related charges and restructuring costs: We incurred significant expenses in connection with acquisitions, principally Siebel, which we would not have otherwise incurred. Acquisition related charges primarily consist of in-process research and development expenses, integration-related professional services, stock-based compensation expenses (in addition to the stock-based compensation expenses described above) and personnel related costs for transitional employees. Stock-based compensation included in acquisition related charges resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the terms of the options. Restructuring costs consist of Oracle employee severance and Oracle duplicate facility closures in connection with acquisitions. We believe it is useful for investors to understand the effect of these expenses on our cost structure. Although acquisition related charges and restructuring costs are not recurring with respect to past acquisitions, we will incur these charges in connection with future acquisitions.

Contact Info

Krista Bessinger
Oracle Investor Relations
+1.650.506.4073
investor_us@oracle.com

Bob Wynne
Oracle Corporate Communications
+1.650.506.5834
bob.wynne@oracle.com

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