EX-99.1 2 dex991.htm PRESS RELEASE DATED JUNE 22, 2006 Press Release dated June 22, 2006

Exhibit 99.1

LOGO

For Immediate Release

 

Contacts:    Krista Bessinger    Bob Wynne
   Oracle Investor Relations    Oracle Corporate Communications
   +1.650.506.4073    +1.650.506.5834
   investor_us@oracle.com    bob.wynne@oracle.com

ORACLE REPORTS Q4 GAAP EPS OF 24 CENTS, NON-GAAP EPS OF 29 CENTS

Applications New License Revenues Up 83%, Database and Middleware New License Revenues Up 18%

REDWOOD SHORES, Calif., June 22, 2006 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2006 Q4 GAAP earnings per share of $0.24, up 24% compared to the same quarter last year. Fourth quarter GAAP revenues were up 25% to $4.9 billion, while quarterly GAAP net income was up 27% to $1.3 billion. Total GAAP software revenues were up 28% to $4.0 billion with GAAP database and middleware new license revenues up 18% and GAAP applications new license revenues up 83%. GAAP services revenues were $857 million, up 13% compared to the same quarter last year.

Non-GAAP earnings per share were $0.29 in Q4, up 11% compared to the same quarter last year. Non-GAAP net income was up 13% to $1.5 billion compared to Q4 last year.

Fiscal year 2006 GAAP earnings per share were $0.64, up 16% compared to the prior year. Fiscal year 2006 GAAP revenues were up 22% to $14.4 billion, while annual GAAP net income was up 17% to $3.4 billion. Total GAAP software revenues for the full year were up 23% to $11.5 billion with annual GAAP database and middleware new license revenues up 9% and annual GAAP applications new license revenues up 66%. Annual GAAP services revenues were $2.8 billion, up 19% compared to the year ago period.

Fiscal year 2006 non-GAAP earnings per share were $0.80, up 19% year over year. Annual non-GAAP net income was up 20% to $4.2 billion compared to fiscal year 2005.

“We reported record revenues and earnings for the fourth quarter and fiscal year 2006,” said Oracle President and CFO, Safra Catz. “In two years, our non-GAAP EPS is up 56%. That is well above our stated goal of a 20% average annual growth rate.”

“In Q4 Oracle delivered accelerating revenue growth across virtually all product lines and geographies,” said Oracle President, Charles Phillips. “Our applications business was especially strong with new license sales growing 83% including acquisitions, and 56% growth on an organic basis. At these very high growth rates, Oracle is rapidly increasing its share of the applications market.”

“Oracle’s database and middleware business grew 18% in the quarter and 9% for the full year,” said CEO, Larry Ellison. “We are growing faster than the overall database market because we are winning share from our competitors. The latest Gartner and IDC reports confirm that Oracle is increasing its lead over the number two database, IBM’s DB2, as more and more companies move their applications off of mainframes and onto Oracle Database Grids.”

###

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 press release relating to Oracle’s results and 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, as amended, and Form 10-Q, particularly under the heading “Factors That May Affect Our Future Results or the Market Price of Our Stock.” Copies of these filings are available online from the SEC at www.sec.gov 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 June 22, 2006. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q4 FISCAL 2006 QUARTER TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

     Three Months Ended May 31,     

% Increase

(Decrease)
in US $

     

% Increase
(Decrease)

in Constant
Currency (1)

  
     2006      % of
Revenues		      2005      % of
Revenues		        
   

REVENUES

                  

New software licenses

    $ 2,121      43%      $ 1,609      42%      32%      32%  

Software license updates and product support

      1,873      39%        1,514      39%      24%      25%  
              

Software Revenues

      3,994      82%        3,123      81%      28%      28%  
              

Services

      857      18%        755      19%      13%      14%  
              

Total Revenues

      4,851      100%        3,878      100%      25%      26%  
              

OPERATING EXPENSES

                  

Sales and marketing

      1,100      23%        807      21%      36%      37%  

Software license updates and product support

      206      4%        180      4%      14%      15%  

Cost of services

      758      16%        611      16%      24%      25%  

Research and development

      536      11%        457      12%      17%      18%  

General and administrative

      145      3%        150      4%      (3% )    0%  

Amortization of intangible assets

      185      4%        121      3%      53%      53%  

Acquisition related

      16      0%        105      3%      (85% )    (86% )

Restructuring

      48      1%        40      1%      19%      20%  
              

Total Operating Expenses

      2,994      62%        2,471      64%      21%      22%  
              

OPERATING INCOME

      1,857      38%        1,407      36%      32%      32%  

Interest expense

      (83 )    (2% )      (66 )    (1% )    26%      26%  

Non-operating income, net

      104      2%        46      1%      127%      130%  
              

INCOME BEFORE PROVISION FOR INCOME TAXES

      1,878      38%        1,387      36%      35%      36%  
              

Provision for income taxes

      578      12%        365      10%      58%      58%  
              

NET INCOME

    $ 1,300      26%      $ 1,022      26%      27%      27%  
              

EARNINGS PER SHARE:

                  

Basic

    $ 0.25         $ 0.20         24%     

Diluted

    $ 0.24         $ 0.20         24%     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

                  

Basic

      5,278           5,145         3%     

Diluted

      5,373           5,234         3%     
   

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2005, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. The United States dollar strengthened relative to major international currencies in the three months ended May 31, 2006 compared with the corresponding prior year period, reducing revenue and operating expense growth by 1 percentage point.

ORACLE CORPORATION

Q4 FISCAL 2006 QUARTER TO DATE

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

(in millions, except per share data)

 

     Three Months Ended May 31,    % Increase
(Decrease) in US $		  
     2006
    GAAP    		        Adj.          2006
Non-GAAP		    2005
    GAAP    		        Adj.          2005
Non-GAAP		    GAAP      Non-GAAP  
   

TOTAL REVENUES (2)

    $ 4,851    $ 86      $ 4,937    $ 3,878    $ 178      $ 4,056    25%      22%  

TOTAL SOFTWARE REVENUES (2)

    $ 3,994    $ 86      $ 4,080    $ 3,123    $ 178      $ 3,301    28%      24%  

New software licenses

      2,121      —          2,121      1,609      —          1,609    32%      32%  

Software license updates and product support (2)

      1,873      86        1,959      1,514      178        1,692    24%      16%  

TOTAL OPERATING EXPENSES

    $ 2,994    $ (257 )    $ 2,737    $ 2,471    $ (281 )    $ 2,190    21%      25%  

Stock-based compensation (3)

      8      (8 )      —        15      (15 )      —      (52% )    0%  

Amortization of intangible assets (4)

      185      (185 )      —        121      (121 )      —      53%      0%  

Acquisition related

      16      (16 )      —        105      (105 )      —      (85% )    0%  

Restructuring

      48      (48 )      —        40      (40 )      —      19%      0%  

OPERATING INCOME

    $ 1,857    $ 343      $ 2,200    $ 1,407    $ 459      $ 1,866    32%      18%  

OPERATING MARGIN %

      38%         45%      36%         46%    6%      (3% )

INCOME BEFORE PROVISION FOR INCOME TAXES

    $ 1,878    $ 343      $ 2,221    $ 1,387    $ 459      $ 1,846    35%      20%  

Income tax effect on above adjustments (5)

      578      106        684      365      126        491    58%      39%  

NET INCOME

    $ 1,300    $ 237      $ 1,537    $ 1,022    $ 333      $ 1,355    27%      13%  

DILUTED EARNINGS PER SHARE

    $ 0.24       $ 0.29    $ 0.20       $ 0.26    24%      11%  
   

 

(1) This presentation includes non-GAAP measures. Our non-GAAP 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. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2) Estimated revenues related to assumed support contracts, as of May 31, 2006, that will not be recognized in future periods due to business combination accounting rules are as follows:

 

     Year Ended
May 31,
 

2007

    $ 137

2008

      9
      

Total

    $ 146
      

 

(3) Stock-based compensation represents the portion of the intrinsic value of unvested options assumed from acquired companies related to future service and is included in the following GAAP operating expenses:

 

     Three Months Ended May 31, 2006    Three Months Ended May 31, 2005
     GAAP    Adj.      Non-GAAP    GAAP    Adj.      Non-GAAP
 

Sales and marketing

    $ 2    $ (2 )    $ —      $ 4    $ (4 )    $ —  

Software license updates and product support

      1      (1 )      —        1      (1 )      —  

Cost of services

      2      (2 )      —        4      (4 )      —  

Research and development

      3      (3 )      —        6      (6 )      —  
                                             

Total stock-based compensation

    $ 8    $ (8 )    $ —      $ 15    $ (15 )    $ —  
                                             

 

     We will adopt FASB Statement 123R in the first quarter of fiscal 2007. Under Statement 123R, the fair value of all stock-based compensation awards will be reflected as an expense. We estimate that stock-based compensation expense will reduce diluted earnings per share by $0.02 to $0.03 in fiscal 2007.

 

(4) Estimated future amortization expense related to intangible assets as of May 31, 2006 is as follows:

 

     Year Ended
May 31,
 

2007

    $ 738

2008

      727

2009

      722

2010

      615

2011

      431

Thereafter

      1,295
      

Total

    $ 4,528
      

 

(5) The income tax provision was calculated reflecting a tax rate of 30.8% and 27.5% in the fourth quarter of fiscal 2006 and 2005, respectively.

ORACLE CORPORATION

FISCAL 2006 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

     Year Ended May 31,     

% Increase

(Decrease)
in US $

     

% Increase
(Decrease)

in Constant
Currency (1)

  
     2006      % of
Revenues		      2005      % of
Revenues		        
   

REVENUES

                  

New software licenses

    $ 4,905      34%      $ 4,091      35%      20%      21%  

Software license updates and product support

      6,636      46%        5,330      45%      25%      26%  
              

Software Revenues

      11,541      80%        9,421      80%      23%      24%  
              

Services

      2,839      20%        2,378      20%      19%      21%  
              

Total Revenues

      14,380      100%        11,799      100%      22%      23%  
              

OPERATING EXPENSES

                  

Sales and marketing

      3,177      22%        2,511      21%      27%      28%  

Software license updates and product support

      719      5%        618      5%      16%      18%  

Cost of services

      2,516      17%        2,033      17%      24%      25%  

Research and development

      1,872      13%        1,491      13%      25%      26%  

General and administrative

      555      4%        550      5%      1%      3%  

Amortization of intangible assets

      583      4%        219      2%      167%      167%  

Acquisition related

      137      1%        208      2%      (34% )    (35% )

Restructuring

      85      1%        147      1%      (42% )    (41% )
              

Total Operating Expenses

      9,644      67%        7,777      66%      24%      25%  
              

OPERATING INCOME

      4,736      33%        4,022      34%      18%      20%  

Interest expense

      (169 )    (1% )      (135 )    (1% )    25%      26%  

Non-operating income, net

      243      1%        164      1%      49%      50%  
              

INCOME BEFORE PROVISION FOR INCOME TAXES

      4,810      33%        4,051      34%      19%      21%  
              

Provision for income taxes

      1,429      9%        1,165      10%      23%      23%  
              

NET INCOME

    $ 3,381      24%      $ 2,886      24%      17%      20%  
              

EARNINGS PER SHARE :

                  

Basic

    $ 0.65         $ 0.56         16%     

Diluted

    $ 0.64         $ 0.55         16%     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

                  

Basic

      5,196           5,136         1%     

Diluted

      5,287           5,231         1%     
   

 

(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2005, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. The United States dollar strengthened relative to major international currencies for the year ended May 31, 2006 compared with the corresponding prior year period, reducing revenue and operating expense growth by 1 percentage point and operating income growth by 2 percentage points.

ORACLE CORPORATION

FISCAL 2006 YEAR TO DATE

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

(in millions, except per share data)

 

     Year Ended May 31,    % Increase
(Decrease) in US $		  
     2006
    GAAP    		        Adj.          2006
Non-GAAP		    2005
    GAAP    		        Adj.          2005
Non-GAAP		    GAAP      Non-GAAP  
   

TOTAL REVENUES (2)

    $ 14,380    $ 391      $ 14,771    $ 11,799    $ 320      $ 12,119    22%      22%  

TOTAL SOFTWARE REVENUES (2)

    $ 11,541    $ 391      $ 11,932    $ 9,421    $ 320      $ 9,741    23%      22%  

New software licenses

      4,905      —          4,905      4,091      —          4,091    20%      20%  

Software license updates and product support (2)

      6,636      391        7,027      5,330      320        5,650    25%      24%  

TOTAL OPERATING EXPENSES

    $ 9,644    $ (836 )    $ 8,808    $ 7,777    $ (599 )    $ 7,178    24%      23%  

Stock-based compensation (3)

      31      (31 )      —        25      (25 )      —      26%      0%  

Amortization of intangible assets (4)

      583      (583 )      —        219      (219 )      —      167%      0%  

Acquisition related

      137      (137 )      —        208      (208 )      —      (34% )    0%  

Restructuring

      85      (85 )      —        147      (147 )      —      (42% )    0%  

OPERATING INCOME

    $ 4,736    $ 1,227      $ 5,963    $ 4,022    $ 919      $ 4,941    18%      21%  

OPERATING MARGIN %

      33%         40%      34%         41%    (3% )    (1% )

INCOME BEFORE PROVISION FOR INCOME TAXES

    $ 4,810    $ 1,227      $ 6,037    $ 4,051    $ 919      $ 4,970    19%      21%  

Income tax effect on above adjustments (5)

      1,429      362        1,791      1,165      264        1,429    23%      25%  

NET INCOME

    $ 3,381    $ 865      $ 4,246    $ 2,886    $ 655      $ 3,541    17%      20%  

DILUTED EARNINGS PER SHARE

    $ 0.64       $ 0.80    $ 0.55       $ 0.68    16%      19%  
   

 

(1) This presentation includes non-GAAP measures. Our non-GAAP 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. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2) Estimated revenues related to assumed support contracts, as of May 31, 2006, that will not be recognized in future periods due to business combination accounting rules are as follows:

 

     Year Ended
May 31,
 

2007

    $ 137

2008

      9
      

Total

    $ 146
      

 

(3) Stock-based compensation represents the portion of the intrinsic value of unvested options assumed from acquired companies related to future service and is included in the following GAAP operating expenses:

 

     Year Ended May 31, 2006    Year Ended May 31, 2005
     GAAP    Adj.      Non-GAAP    GAAP    Adj.      Non-GAAP
 

Sales and marketing

    $ 8    $ (8 )    $ —      $ 6    $ (6 )    $ —  

Software license updates and product support

      3      (3 )      —        2      (2 )      —  

Cost of services

      7      (7 )      —        7      (7 )      —  

Research and development

      13      (13 )      —        10      (10 )      —  
                                             

Total stock-based compensation

    $ 31    $ (31 )    $ —      $ 25    $ (25 )    $ —  
                                             

 

     We will adopt FASB Statement 123R in the first quarter of fiscal 2007. Under Statement 123R, the fair value of all stock-based compensation awards will be reflected as an expense. We estimate that stock-based compensation expense will reduce diluted earnings per share by $0.02 to $0.03 in fiscal 2007.

 

(4) Estimated future amortization expense related to intangible assets as of May 31, 2006 is as follows:

 

     Year Ended
May 31,
 

2007

    $ 738

2008

      727

2009

      722

2010

      615

2011

      431

Thereafter

      1,295
      

Total

    $ 4,528
      

 

(5) The income tax provision was calculated to reflect a 29.7% and 28.8% tax rate in fiscal year 2006 and 2005, respectively.

ORACLE CORPORATION

FISCAL 2006 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS (1)

($ in millions)

 

     May 31,
2006		    May 31,
2005		  
   

ASSETS

      

Current Assets:

      

Cash and cash equivalents

    $ 6,659    $ 3,894   

Marketable securities

      946      877  

Trade receivables, net

      3,022      2,570  

Deferred tax assets

      558      486  

Other current assets

      633      621  
        

Total Current Assets

      11,818      8,448  

Non-Current Assets:

      

Property, net

      1,391      1,442  

Intangible assets, net

      4,528      3,373  

Goodwill

      9,809      7,003  

Other assets

      1,327      421  
        

Total Non-Current Assets

      17,055      12,239  
        

TOTAL ASSETS

    $ 28,873    $ 20,687  
        

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Current Liabilities:

      

Short-term borrowings and current portion of long-term debt

    $ 159    $ 2,693  

Accounts payable

      268      230  

Income taxes payable

      810      904  

Accrued compensation and related benefits

      1,172      923  

Accrued restructuring

      412      156  

Deferred revenues

      2,830      2,289  

Other current liabilities

      1,279      868  
        

Total Current Liabilities

      6,930      8,063  

Non-Current Liabilities:

      

Long-term debt

      5,735      159  

Deferred tax liabilities

      408      1,010  

Accrued restructuring

      273      120  

Deferred revenues

      114      126  

Other long-term liabilities

      401      372  
        

Total Non-Current Liabilities

      6,931      1,787  

Stockholders’ Equity

      15,012      10,837  
        

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $ 28,873    $ 20,687  
        
   

 

(1) Certain prior period balances have been reclassified to conform to the current period presentation.

ORACLE CORPORATION

FISCAL 2006 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)

($ in millions)

 

     Year Ended May 31,  
     2006      2005  
   

Cash Flows From Operating Activities:

      

Net income

    $ 3,381      $ 2,886  

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

      

Depreciation

      223        206  

Amortization of intangible assets

      583        219  

Provision for trade receivable allowances

      241        197  

Deferred income taxes

      (40 )      (66 )

Minority interests in income

      41        42  

Stock-based compensation

      49        72  

Non cash restructuring

      —          33  

In-process research and development

      78        46  

Net investment gains related to equity securities

      (39 )      (2 )

Changes in operating assets and liabilities, net of effects from acquisitions:

      

Increase in trade receivables

      (355 )      (88 )

Decrease in prepaid expenses and other assets

      14        164  

Increase (decrease) in accounts payable and other liabilities

      23        (533 )

Increase (decrease) in income taxes payable

      64        (18 )

Increase in deferred revenues

      278        394  
        

Net cash provided by operating activities

      4,541        3,552  
        

Cash Flows From Investing Activities:

      

Purchases of investments

      (2,128 )      (7,101 )

Proceeds from maturities and sale of investments

      3,676        12,194  

Acquisitions, net of cash acquired

      (3,953 )      (10,656 )

Purchases of equity and other investments

      (858 )      (2 )

Capital expenditures

      (236 )      (188 )

Proceeds from sales of property

      140        —    
        

Net cash used for investing activities

      (3,359 )      (5,753 )
        

Cash Flows From Financing Activities:

      

Payments for repurchase of common stock

      (2,067 )      (1,343 )

Proceeds from issuance of common stock

      632        596  

Proceeds from borrowings, net of financing costs

      12,636        12,505  

Payments of debt

      (9,635 )      (9,830 )

Distributions to minority interests

      (39 )      (44 )
        

Net cash provided by financing activities

      1,527        1,884  
        

Effect of exchange rate changes on cash and cash equivalents

      56        73  
        

Net increase (decrease) in cash and cash equivalents

      2,765        (244 )
        

Cash and cash equivalents at beginning of period

      3,894        4,138  
        

Cash and cash equivalents at end of period

    $ 6,659      $ 3,894  
        
   

 

(1) Certain prior period balances have been reclassified to conform to the current period presentation.

ORACLE CORPORATION

FISCAL 2006 FINANCIAL RESULTS

FREE CASH FLOW—TRAILING 4-QUARTERS (1)

($ in millions)

 

     Fiscal 2005      Fiscal 2006  
     Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4  
   

GAAP Operating Cash Flow

    $ 3,350      $ 3,386      $ 3,575      $ 3,552      $ 3,596      $ 3,509      $ 3,857      $ 4,541  

Capital Expenditures (2)

      (147 )      (178 )      (195 )      (188 )      (206 )      (182 )      (199 )      (236 )
        

Free Cash Flow

    $ 3,203      $ 3,208      $ 3,380      $ 3,364      $ 3,390      $ 3,327      $ 3,658      $ 4,305  
        

% Growth

      16%        12%        27%        12%        6%        4%        8%        28%  
   

GAAP Net Income

    $ 2,749      $ 2,948      $ 2,854      $ 2,886      $ 2,896      $ 2,878      $ 3,103      $ 3,381  

Free Cash Flow as a % of Net Income

      117%        109%        118%        117%        117%        116%        118%        127%  
   

 

(1) To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.

 

(2) Represents capital expenditures as reported in cash flows from investing activities of our cash flow statements presented in accordance with U.S. generally accepted accounting principles.

ORACLE CORPORATION

FISCAL 2006 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

(in millions, except headcount data)

 

     Fiscal 2005    Fiscal 2006  
     Q1      Q2      Q3    Q4      TOTAL    Q1    Q2    Q3    Q4      TOTAL  
   

REVENUES

                              

New software licenses

    $ 563      $ 971      $ 947    $ 1,609      $ 4,091    $ 629    $ 1,058    $ 1,096    $ 2,121      $ 4,905  

Software license updates and product support

      1,176        1,252        1,389      1,514        5,330      1,502      1,559      1,703      1,873        6,636  
        

Software Revenues

      1,739        2,223        2,336      3,123        9,421      2,131      2,617      2,799      3,994        11,541  

Consulting

      355        395        470      589        1,810      481      506      501      632        2,120  

On Demand

      71        72        76      80        299      84      87      96      130        397  

Education

      50        66        68      86        269      72      82      74      95        322  
        

Services Revenues

      476        533        614      755        2,378      637      675      671      857        2,839  
        

Total Revenues

    $ 2,215      $ 2,756      $ 2,950    $ 3,878      $ 11,799    $ 2,768    $ 3,292    $ 3,470    $ 4,851      $ 14,380  
        

AS REPORTED REVENUE GROWTH RATES

                              

New software licenses

      7%        14%        12%      23%        16%      12%      9%      16%      32%        20%  

Software license updates and product support

      14%        12%        18%      26%        18%      28%      25%      23%      24%        25%  

Software Revenues

      11%        13%        15%      24%        17%      23%      18%      20%      28%        23%  

Consulting

      (10% )      0%        26%      40%        14%      36%      28%      7%      7%        17%  

On Demand

      18%        11%        23%      12%        16%      18%      20%      26%      62%        32%  

Education

      (11% )      (4% )      37%      32%        13%      42%      25%      9%      11%        20%  

Services Revenues

      (7% )      1%        27%      35%        14%      34%      26%      9%      13%        19%  

Total Revenues

      7%        10%        18%      26%        16%      25%      19%      18%      25%        22%  

CONSTANT CURRENCY GROWTH RATES

                              

New software licenses

      3%        9%        8%      20%        12%      10%      12%      20%      32%        21%  

Software license updates and product support

      10%        8%        15%      22%        14%      26%      27%      27%      25%        26%  

Software Revenues

      8%        8%        12%      21%        13%      21%      20%      24%      28%        24%  

Consulting

      (13% )      (4% )      23%      36%        10%      34%      31%      10%      8%        19%  

On Demand

      14%        7%        20%      9%        12%      17%      22%      29%      63%        33%  

Education

      (14% )      (9% )      33%      28%        8%      40%      27%      13%      12%        21%  

Services Revenues

      (10% )      (3% )      23%      32%        10%      32%      29%      13%      14%        21%  

Total Revenues

      3%        6%        14%      23%        12%      23%      22%      22%      26%        23%  
   

GEOGRAPHIC REVENUES

                              

REVENUES

                              

Americas

    $ 1,091      $ 1,292      $ 1,437    $ 1,977      $ 5,798    $ 1,475    $ 1,733    $ 1,848    $ 2,595      $ 7,652  

Europe, Middle East & Africa

      778        1,062        1,088      1,361        4,288      883      1,090      1,164      1,572        4,708  

Asia Pacific

      346        402        425      540        1,713      410      469      458      684        2,020   
        

Total Revenues

    $ 2,215      $ 2,756      $ 2,950    $ 3,878      $ 11,799    $ 2,768    $ 3,292    $ 3,470    $ 4,851      $ 14,380  
        
   

HEADCOUNT

                              

GEOGRAPHIC AREA

                              

Domestic

      16,458        16,347        21,774      21,544           21,198      21,133      23,256      23,209     

International

      25,610        26,233        29,107      28,328            28,318      30,021      32,326      32,924      
                       

Total Company

      42,068        42,580        50,881      49,872           49,516      51,154      55,582      56,133     
                       
   

 

(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

ORACLE CORPORATION

FISCAL 2006 FINANCIAL RESULTS

SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1)

($ in millions)

 

     Fiscal 2005    Fiscal 2006  
     Q1      Q2    Q3    Q4    Total    Q1    Q2    Q3    Q4    Total  
   

APPLICATIONS REVENUES

                              

New software licenses

    $ 69      $ 215    $ 152    $ 350    $ 785    $ 127    $ 266    $ 269    $ 641    $ 1,303   

Software license updates and product support

      238        254      351      445      1,288      466      502      608      676      2,252  
        

Software Revenues

      307        469      503      795      2,073      593      768      877      1,317      3,555  

AS REPORTED GROWTH RATES

                              

New software licenses

      (36% )      57%      9%      52%      28%      84%      24%      77%      83%      66%  

Software license updates and product support

      8%        7%      48%      86%      38%      96%      98%      73%      52%      75%  

Software Revenues

      (6% )      25%      34%      69%      34%      93%      64%      74%      66%      71%  

CONSTANT CURRENCY GROWTH RATES

                              

New software licenses

      (38% )      51%      7%      49%      25%      82%      27%      82%      83%      67%  

Software license updates and product support

      4%        3%      43%      80%      33%      93%      101%      79%      53%      77%  

Software Revenues

      (9% )      21%      30%      65%      30%      91%      67%      80%      66%      72%  
   

DATABASE & MIDDLEWARE REVENUES

                              

New software licenses

    $ 494      $ 756    $ 795    $ 1,259    $ 3,306    $ 502    $ 792    $ 827    $ 1,480    $ 3,602  

Software license updates and product support

      938        998      1,038      1,069      4,042      1,036      1,057      1,095      1,197      4,384  
        

Software Revenues

      1,432        1,754      1,833      2,328      7,349      1,538      1,849      1,922      2,677      7,986  

AS REPORTED GROWTH RATES

                              

New software licenses

      18%        5%      12%      16%      13%      2%      5%      4%      18%      9%  

Software license updates and product support

      15%        14%      11%      11%      12%      10%      6%      6%      12%      8%  

Software Revenues

      16%        10%      11%      14%      13%      7%      5%      5%      15%      9%  

CONSTANT CURRENCY GROWTH RATES

                              

New software licenses

      14%        1%      9%      13%      9%      0%      8%      8%      18%      10%  

Software license updates and product support

      11%        10%      7%      7%      9%      9%      8%      9%      13%      9%  

Software Revenues

      12%        6%      8%      10%      9%      6%      8%      9%      15%      10%  
   

 

(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

ORACLE CORPORATION

FISCAL 2006 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE REVENUES ANALYSIS (1) (2)

($ in millions)

 

     Fiscal 2005    Fiscal 2006  
     Q1      Q2      Q3    Q4    TOTAL    Q1      Q2      Q3      Q4    TOTAL  
   

AMERICAS

                              

Database & Middleware

    $ 197      $ 285      $ 289    $ 542    $ 1,313    $ 194      $ 327      $ 334      $ 662    $ 1,518   

Applications

      30        116        91      229      466      75        163        148        395      782  
        

New Software License Revenues

    $ 227      $ 401      $ 380    $ 771    $ 1,779    $ 269      $ 490      $ 482      $ 1,057    $ 2,300  
        

AS REPORTED GROWTH RATES

                              

Database & Middleware

      22%        (5% )      14%      29%      16%      (2% )      15%        16%        22%      16%  

Applications

      (27% )      53%        7%      71%      39%      150%        41%        61%        73%      67%  

New Software License Revenues

      12%        7%        12%      39%      21%      19%        22%        27%        37%      29%  

CONSTANT CURRENCY GROWTH RATES

                              

Database & Middleware

      21%        (5% )      12%      27%      15%      (4% )      13%        14%        21%      14%  

Applications

      (27% )      51%        7%      69%      38%      148%        40%        60%        72%      66%  

New Software License Revenues

      11%        7%        11%      37%      20%      17%        21%        25%        36%      28%  
   

EUROPE / MIDDLE EAST / AFRICA

                              

Database & Middleware

    $ 158      $ 304      $ 325    $ 483    $ 1,270    $ 164      $ 282      $ 316      $ 515    $ 1,278  

Applications

      28        80        44      76      227      38        75        96        158      366  
        

New Software License Revenues

    $ 186      $ 384      $ 369    $ 559    $ 1,497    $ 202      $ 357      $ 412      $ 673    $ 1,644  
        

AS REPORTED GROWTH RATES

                              

Database & Middleware

      10%        16%        12%      7%      11%      4%        (7% )      (3% )      7%      1%  

Applications

      (49% )      67%        7%      6%      5%      38%        (6% )      119%        108%      61%  

New Software License Revenues

      (6% )      23%        11%      7%      10%      9%        (7% )      12%        20%      10%  

CONSTANT CURRENCY GROWTH RATES

                              

Database & Middleware

      3%        5%        6%      3%      4%      3%        0%        6%        7%      5%  

Applications

      (53% )      54%        2%      3%      0%      36%        1%        138%        108%      67%  

New Software License Revenues

      (12% )      13%        6%      3%      4%      8%        0%        22%        21%      14%  
   

ASIA PACIFIC

                              

Database & Middleware

    $ 131      $ 160      $ 168    $ 222    $ 682    $ 134      $ 176      $ 170      $ 292    $ 771  

Applications

      11        19        17      45      92      14        28        25        88      155  
        

New Software License Revenues

    $ 142      $ 179      $ 185    $ 267    $ 774    $ 148      $ 203      $ 195      $ 380    $ 926  
        

AS REPORTED GROWTH RATES

                              

Database & Middleware

      27%        7%        8%      10%      12%      2%        9%        1%        31%      13%  

Applications

      0%        46%        21%      80%      46%      28%        48%        52%        94%      69%  

New Software License Revenues

      25%        10%        9%      18%      15%      4%        13%        5%        42%      20%  

CONSTANT CURRENCY GROWTH RATES

                              

Database & Middleware

      21%        3%        3%      7%      8%      0%        14%        6%        34%      16%  

Applications

      0%        38%        23%      72%      42%      23%        50%        60%        96%      71%  

New Software License Revenues

      19%        6%        5%      14%      11%      2%        18%        11%        45%      23%  
   

TOTAL COMPANY

                              

Database & Middleware

    $ 486      $ 749      $ 782    $ 1,247    $ 3,265    $ 492      $ 785      $ 820      $ 1,469    $ 3,567  

Applications

      69        215        152      350      785      127        266        269        641      1,303  
        

New Software License Revenues

    $ 555      $ 964      $ 934    $ 1,597    $ 4,050    $ 619      $ 1,051      $ 1,089      $ 2,110    $ 4,870  
        

AS REPORTED GROWTH RATES

                              

Database & Middleware

      19%        5%        12%      16%      13%      1%        5%        5%        18%      9%  

Applications

      (36% )      57%        9%      52%      28%      84%        24%        77%        83%      66%  

New Software License Revenues

      8%        14%        11%      22%      15%      12%        9%        17%        32%      20%  

CONSTANT CURRENCY GROWTH RATES

                              

Database & Middleware

      14%        1%        8%      13%      9%      0%        8%        9%        18%      10%  

Applications

      (38% )      51%        7%      49%      25%      82%        27%        82%        83%      67%  

New Software License Revenues

      4%        9%        8%      20%      12%      10%        12%        21%        32%      21%  
   

 

(1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

(2) New Software License Revenues presented exclude documentation and miscellaneous revenues.

APPENDIX A

ORACLE CORPORATION

FISCAL 2006 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

Due to a series of acquisitions, our results of operations have undergone significant change. 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 and other significant expenses, 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 assure that customers will renew these contracts.

 

  •   Stock-based compensation: Certain of our operating expenses include stock-based compensation related to unvested stock options assumed in connection with acquisitions. We believe it is useful to highlight the effect of stock-based compensation related to acquisitions because, in compliance with our historical practices under SFAS 123, we do not otherwise expense Oracle stock-based compensation in the current or in past reporting periods. However, 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. 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 PeopleSoft and 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.