EX-99.1 2 dex991.htm PRESS RELEASE DATED DECEMBER 17, 2009 Press Release dated December 17, 2009

Exhibit 99.1

LOGO

For Immediate Release

 

Contact:

  

Ken Bond

  

Karen Tillman

 

Oracle Investor Relations

  

Oracle Corporate Communications

 

1.650.607.0349

  

1.650.607.0326

  ken.bond@oracle.com   karen.tillman@oracle.com

ORACLE REPORTS Q2 GAAP EPS OF 29 CENTS UP 15%, NON-GAAP EPS OF 39 CENTS UP 15%

Total Revenues Up, New Software License Sales Up, Operating Margin Up, Operating Cash Flow Up

REDWOOD SHORES, Calif., December 17, 2009 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2010 Q2 GAAP earnings per share of $0.29, up 15% compared to last year. Second quarter GAAP total revenues were up 4% to $5.9 billion, while quarterly GAAP net income was up 12% to $1.5 billion. GAAP new software license revenues were up 2% to $1.7 billion. GAAP software license updates and product support revenues were up 14% to $3.2 billion. GAAP operating income was up 10% to $2.2 billion and GAAP operating margin was up 200 basis points to 37%. GAAP operating cash flow on a trailing twelve-month basis was $8.7 billion, up 7%.

Second quarter non-GAAP earnings per share were up 15% to $0.39. Non-GAAP total revenues were up 3% to $5.9 billion, while non-GAAP net income was up 12% to $2.0 billion, compared to the same quarter last year. Non-GAAP operating income was up 9% to $2.9 billion and non-GAAP operating margin was up 280 basis points to 49%.

“We delivered results which were substantially better than we expected on both the top and bottom line, growing non-GAAP operating margins by 280 basis points to 49%, the highest Q2 non-GAAP operating margin in our history,” said Oracle CFO Jeff Epstein. “Our solid top line growth, coupled with disciplined expense management, was key in generating $8.4 billion of free cash flow over the last twelve months.”

“We expect the European Commission to unconditionally clear the acquisition of Sun in January,” said Oracle President Safra Catz. “I want to thank all of our customers for the overwhelming support they have given us during this process.”

“For the fourth consecutive quarter, Oracle took market share from SAP in every region around the world,” said Oracle President Charles Phillips. “In constant currency, our applications business grew 1% in the Americas and 2% in Asia Pacific versus a negative 35% and negative 34% respectively for SAP.”

“Sun’s new SPARC Solaris system and Sun’s new Exadata database machine both run the Oracle database faster than IBM’s fastest computer,” said Oracle CEO Larry Ellison. “We expect Sun to rapidly improve both its market share and margins once this merger closes.”

In addition, Oracle’s Board of Directors declared a cash dividend of $0.05 per share of outstanding common stock to be paid to stockholders of record as of the close of business on January 19, 2010, with a payment date of February 9, 2010. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of Oracle’s Board of Directors.

Q2 Earnings Conference Call and Webcast

Oracle will hold a conference call and web broadcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (866) 423-8620 or (719) 387-4093, Passcode: 983270. To access the live web broadcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor.

About Oracle

Oracle is the world’s largest business software company. For more information about Oracle, please visit our website at http://www.oracle.com or call Investor Relations at (650) 506-4073.

# # #

Trademarks

Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

“Safe Harbor” Statement: Statements in this press release relating to Oracle’s or its Board of Directors’ future plans, expectations, intentions 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, including the recent global economic and financial crisis, could adversely affect our business, operating results or financial condition, including our revenue growth and profitability, through reductions in customer IT budgets and expenditures and through the general tightening of access to credit.

(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 services or new versions of existing or acquired products or services. (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) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses and risks relating to compliance with international and U.S. laws that apply to our international operations. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions and could require us to reduce prices or cause us to lose customers. Also the Sun acquisition may not be cleared by relevant regulatory authorities, may not otherwise close or the closing of the proposed transaction may be further delayed and Oracle or Sun may be adversely affected by other economic, business, and/or competitive factors. No assurances can be given that the European Commission will clear the transaction, that the closing will transpire or occur, or if these events occur, what impact they will have on the results of operations or financial condition of Oracle or Sun. 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 press release is current as of December 17, 2009. Oracle undertakes no duty to update any statement in light of new information or future events.

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

     Three Months Ended November 30,     % Increase    

% Increase

(Decrease)

  
      2009     % of
Revenues		     2008     % of
Revenues		     (Decrease)
in US $		     in Constant
Currency (1)		  

 

REVENUES

             

New software licenses

    $   1,653      28%      $   1,626      29%       2%      (5% ) 

Software license updates and product support

      3,247      56%        2,850      51%       14%      9%   
            

Software Revenues

      4,900      84%        4,476      80%       9%      4%   
            

Services

      958      16%        1,131      20%       (15% )    (19% ) 
            

Total Revenues

      5,858      100%        5,607      100%       4%      0%   
            

 

OPERATING EXPENSES

            

Sales and marketing

      1,133      19%        1,146      20%       (1% )    (5% ) 

Software license updates and product support

      264      5%        257      5%       3%      (1% ) 

Cost of services

      832      14%        939      17%       (11% )    (15% ) 

Research and development

      708      12%        651      12%       9%      7%   

General and administrative

      183      3%        174      3%       5%      3%   

Amortization of intangible assets

      436      8%        427      8%       2%      2%   

Acquisition related and other

      10      0%        21      0%       (52% )    (49% ) 

Restructuring

      114      2%        17      0%       561%      504%   
            

Total Operating Expenses

      3,680      63%        3,632      65%       1%      (2% ) 
            

OPERATING INCOME

      2,178      37%        1,975      35%       10%      2%   

Interest expense

      (188 )    (3% )      (157 )    (3% )     20%      20%   

Non-operating income, net

      33      1%        8      0%       315%      264%   
            

INCOME BEFORE PROVISION FOR INCOME TAXES

      2,023      35%        1,826      32%       11%      2%   
            

Provision for income taxes

      565      10%        530      9%       7%      (2% ) 
            

NET INCOME

    $ 1,458      25%      $ 1,296      23%       12%      3%   
            

EARNINGS PER SHARE:

             

Basic

    $ 0.29        $ 0.25         

Diluted

    $ 0.29        $ 0.25         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

             

Basic

      5,010          5,127         

Diluted

      5,064          5,187         

 

 

(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, 2009, 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 weakened relative to most major international currencies in the three months ended November 30, 2009 compared with the corresponding prior year period, increasing revenues by 4 percentage points, operating expenses by 3 percentage points and operating income by 8 percentage points.

 

1

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

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

($ in millions, except per share data)

 

     Three Months Ended November 30,    % Increase
(Decrease) in US $		    % Increase (Decrease) in
Constant Currency (2)
      2009  
GAAP  		    Adj.    2009
Non-GAAP		    2008  
GAAP  		    Adj.    2008
Non-GAAP		    GAAP    Non-GAAP    GAAP    Non-GAAP

 

TOTAL REVENUES (3)

 

    $

 

   5,858   

 

    $

 

 14 

 

    $

 

 5,872   

 

    $

 

   5,607   

 

    $

 

 80 

 

    $

 

   5,687   

 

    4% 

 

    3% 

 

    0% 

 

    (2%)

 

TOTAL SOFTWARE REVENUES (3)

    $ 4,900       $ 14     $ 4,914       $ 4,476       $ 80     $ 4,556       9%     8%     4%     3% 

New software licenses

      1,653         —      1,653         1,626         —       1,626       2%     2%     (5%)    (5%)

Software license updates and product support (3)

      3,247         14       3,261         2,850         80       2,930       14%     11%     9%     7% 

 

TOTAL OPERATING EXPENSES

    $ 3,680       $   (664)    $ 3,016       $ 3,632       $   (554)    $ 3,078       1%     (2%)    (2%)    (6%)

Stock-based compensation (4)

      104         (104)      —         89         (89)      —       17%     *        17%     *    

Amortization of intangible assets (5)

      436         (436)      —         427         (427)      —       2%     *        2%     *    

Acquisition related and other

      10         (10)      —         21         (21)      —       (52%)    *        (49%)    *    

Restructuring

      114         (114)      —         17         (17)      —       561%     *        504%     *    

OPERATING INCOME

    $ 2,178       $ 678    $ 2,856       $ 1,975       $ 634     $ 2,609       10%     9%     2%     3% 

OPERATING MARGIN %

      37%         49%      35%         46%    197 bp    277 bp    90 bp    214 bp

INCOME TAX EFFECTS (6)

    $ 565       $ 175    $ 740       $ 530       $ 184     $ 714       7%     4%     (2%)    (3%)

NET INCOME

    $ 1,458       $ 503    $ 1,961       $ 1,296       $ 450     $ 1,746       12%     12%     3%     5% 

DILUTED EARNINGS PER SHARE

    $ 0.29          $ 0.39       $ 0.25          $ 0.34       15%     15%     6%     8% 

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

      5,064         —       5,064         5,187         —       5,187       (2%)    (2%)    (2%)    (2%)

 

 

(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) 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, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

 

(3) As of November 30, 2009, approximately $18 million and $14 million in estimated revenues related to assumed support contracts will not be recognized for the remainder of fiscal 2010 and fiscal 2011, respectively, due to business combination accounting rules.

 

(4) Stock-based compensation is included in the following GAAP operating expense categories:

 

      Three Months Ended
November 30, 2009		    Three Months Ended
November 30, 2008
   GAAP    Adj.     Non-GAAP    GAAP    Adj.     Non-GAAP

Sales and marketing

    $ 20    $ (20 )    $ —    $ 16    $     (16 )    $ —

Software license updates and product support

      4      (4 )      —      3      (3 )      —

Cost of services

      3      (3 )      —      3      (3 )      —

Research and development

      44      (44 )      —      45      (45 )      —

General and administrative

      33      (33 )      —      22      (22 )      —
                                           

Subtotal

      104      (104 )      —      89      (89 )      —
                                           

Acquisition related and other

      —      —        —      6      (6 )      —
                                           

Total stock-based compensation

    $ 104    $   (104 )    $ —    $ 95    $ (95 )    $ —
                                           

 

(5) Estimated future annual amortization expense related to intangible assets as of November 30, 2009 is as follows:

 

Remainder of Fiscal 2010

    $ 796

Fiscal 2011

      1,416

Fiscal 2012

      1,268

Fiscal 2013

      1,117

Fiscal 2014

      900

Fiscal 2015

      706

Thereafter

      381
      

Total

    $     6,584
      

 

(6) Income tax effects were calculated reflecting an effective GAAP tax rate of 27.9% and 29.0% in the second quarter of fiscal 2010 and 2009, respectively, and an effective non-GAAP tax rate of 27.4% and 29.0% in the second quarter of fiscal 2010 and 2009, respectively. The differences between our GAAP and non-GAAP tax rates in the second quarter of fiscal 2010 were due to differences in jurisdictional tax rates and the related tax benefits attributable to our restructuring expenses in this period.

 

* Not meaningful

 

2

ORACLE CORPORATION

Q2 FISCAL 2010 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

     Six Months Ended November 30,     % Increase     % Increase
(Decrease)		  
      2009     % of
Revenues		     2008     % of
Revenues		     (Decrease)
in US $		     in Constant
Currency (1)		  

 

REVENUES

             

New software licenses

    $ 2,681      25%      $ 2,863      26%       (6% )    (9% ) 

Software license updates and product support

      6,364      58%        5,785      53%       10%      10%   
            

Software Revenues

      9,045      83%        8,648      79%       5%      4%   
            

Services

      1,866      17%        2,290      21%       (19% )    (18% ) 
            

Total Revenues

      10,911      100%        10,938      100%       0%      (1% ) 
            

 

OPERATING EXPENSES

            

Sales and marketing

      2,093      19%        2,258      21%       (7% )    (7% ) 

Software license updates and product support

      490      4%        539      5%       (9% )    (9% ) 

Cost of services

      1,614      15%        1,965      18%       (18% )    (17% ) 

Research and development

      1,368      13%        1,360      12%       1%      1%   

General and administrative

      383      4%        379      3%       1%      2%   

Amortization of intangible assets

      867      8%        839      8%       3%      3%   

Acquisition related and other

      16      0%        71      1%       (77% )    (75% ) 

Restructuring

      162      1%        31      0%       426%      414%   
            

Total Operating Expenses

      6,993      64%        7,442      68%       (6% )    (6% ) 
            

OPERATING INCOME

      3,918      36%        3,496      32%       12%      10%   

Interest expense

      (368 )    (3% )      (317 )    (3% )     16%      16%   

Non-operating income, net

      35      0%        90      1%       (62% )    (60% ) 
            

INCOME BEFORE PROVISION FOR INCOME TAXES

      3,585      33%        3,269      30%       10%      7%   
            

Provision for income taxes

      1,003      9%        896      8%       12%      10%   
            

NET INCOME

    $ 2,582      24%      $ 2,373      22%       9%      7%   
            

EARNINGS PER SHARE:

             

Basic

    $ 0.52        $ 0.46         

Diluted

    $ 0.51        $ 0.46         

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

             

Basic

      5,010          5,140         

Diluted

      5,063          5,211         

 

 

(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, 2009, 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 slightly weakened relative to most major international currencies in the six months ended November 30, 2009 compared with the corresponding prior year period, increasing revenues by 1 percentage point and operating income by 2 percentage points.

 

3

ORACLE CORPORATION

Q2 FISCAL 2010 YEAR TO DATE FINANCIAL RESULTS

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

($ in millions, except per share data)

 

    Six Months Ended November 30,   % Increase
(Decrease) in US $		     % Increase (Decrease) in
Constant Currency (2)		  
     2009  
GAAP  		   Adj.   2009
Non-GAAP		   2008  
GAAP  		   Adj.   2008
Non-GAAP		   GAAP   Non-GAAP     GAAP   Non-GAAP  

 

TOTAL REVENUES (3)

 

   $

 

   10,911   

 

   $

 

 23 

 

   $

 

   10,934   

 

   $

 

   10,938   

 

   $

 

 171 

 

   $

 

 11,109   

 

   0% 

 

   (2%)

 

   

 

   (1%)

 

   (2%)

 

   

 

TOTAL SOFTWARE REVENUES (3)

   $ 9,045      $ 23    $ 9,068      $ 8,648      $ 171    $ 8,819      5%    3%       4%    2%    

New software licenses

     2,681        —      2,681        2,863        —      2,863      (6%)   (6%)      (9%)   (9%)   

Software license updates and product support (3)

     6,364        23      6,387        5,785        171      5,956      10%    7%       10%    7%    

 

TOTAL OPERATING EXPENSES

   $ 6,993      $   (1,233)    $ 5,760      $ 7,442      $   (1,116)   $ 6,326      (6%)   (9%)      (6%)   (9%)   

Stock-based compensation (4)

     188        (188)      —        175        (175)     —      7%    *          7%    *       

Amortization of intangible assets (5)

     867        (867)      —        839        (839)     —      3%    *          3%    *       

Acquisition related and other

     16        (16)      —        71        (71)     —      (77%)   *          (75%)   *       

Restructuring

     162        (162)      —        31        (31)     —      426%    *          414%    *       

OPERATING INCOME

   $ 3,918      $ 1,256    $ 5,174      $ 3,496      $ 1,287    $ 4,783      12%    8%       10%    6%    

OPERATING MARGIN %

     36%       47%     32%       43%   395 bp   426 bp      341 bp   377 bp   

INCOME TAX EFFECTS (6)

   $ 1,003      $ 337    $ 1,340      $ 896      $ 353    $ 1,249      12%    7%       10%    6%    

NET INCOME

   $ 2,582      $ 919    $ 3,501      $ 2,373      $ 934    $ 3,307      9%    6%       7%    4%    

DILUTED EARNINGS PER SHARE

   $ 0.51        $ 0.69      $ 0.46        $ 0.63      12%    9%       9%    7%    

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     5,063        —      5,063        5,211        —      5,211      (3%)   (3%)      (3%)   (3%)   

 

 

(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) 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, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

 

(3) As of November 30, 2009, approximately $18 million and $14 million in estimated revenues related to assumed support contracts will not be recognized for the remainder of fiscal 2010 and fiscal 2011, respectively, due to business combination accounting rules.

 

(4) Stock-based compensation is included in the following GAAP operating expense categories:

 

      Six Months Ended
November 30, 2009		    Six Months Ended
November 30, 2008
   GAAP    Adj.      Non-GAAP    GAAP    Adj.      Non-GAAP

Sales and marketing

    $ 36    $ (36 )     $ —    $ 35    $ (35 )     $ —

Software license updates and product support

      8      (8 )       —      6      (6 )       —

Cost of services

      6      (6 )       —      6      (6 )       —

Research and development

      76      (76 )       —      82      (82 )       —

General and administrative

      62      (62 )       —      46      (46 )       —
                                             

Subtotal

      188      (188 )       —      175      (175 )       —
                                             

Acquisition related and other

      —      —         —      11      (11 )       —
                                             

Total stock-based compensation

    $ 188    $   (188 )     $ —    $ 186    $   (186 )     $ —
                                             

 

(5) Estimated future annual amortization expense related to intangible assets as of November 30, 2009 is as follows:

 

Remainder of Fiscal 2010

    $ 796

Fiscal 2011

      1,416

Fiscal 2012

      1,268

Fiscal 2013

      1,117

Fiscal 2014

      900

Fiscal 2015

      706

Thereafter

      381
      

Total

    $     6,584
      

 

(6) Income tax effects were calculated reflecting an effective GAAP tax rate of 28.0% and 27.4% in the first half of fiscal 2010 and 2009, respectively, and an effective non-GAAP tax rate of 27.7% and 27.4% in the first half of fiscal 2010 and 2009, respectively. The differences between our GAAP and non-GAAP tax rates in the first half of fiscal 2010 were due to differences in jurisdictional tax rates and the related tax benefits attributable to our restructuring expenses in this period.

 

* Not meaningful

 

4

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

 

      November 30,
2009		   

May 31,

2009

 

ASSETS

 

      

Current Assets:

      

Cash and cash equivalents

    $ 14,919    $ 8,995 

Marketable securities

      5,865      3,629 

Trade receivables, net

      3,086      4,430 

Deferred tax assets

      703      661 

Prepaid expenses and other current assets

      662      866 
      

Total Current Assets

      25,235      18,581 

 

Non-Current Assets:

      

Property, net

      1,956      1,922 

Intangible assets, net

      6,584      7,269 

Goodwill

      19,098      18,842 

Other assets

      960      802 
      

Total Non-Current Assets

      28,598      28,835 
      

 

TOTAL ASSETS

    $ 53,833    $ 47,416 
      

 

LIABILITIES AND STOCKHOLDERS' EQUITY

      

Current Liabilities:

      

Notes payable, current and other current borrowings

    $ 1,001    $ 1,001 

Accounts payable

      255      271 

Accrued compensation and related benefits

      1,129      1,409 

Deferred revenues

      4,395      4,592 

Other current liabilities

      1,754      1,876 
      

Total Current Liabilities

      8,534      9,149 

 

Non-Current Liabilities:

      

Notes payable and other non-current borrowings

      13,751      9,237 

Income taxes payable

      2,592      2,423 

Deferred tax liabilities

      351      480 

Other non-current liabilities

      690      682 
      

Total Non-Current Liabilities

      17,384      12,822 

 

Stockholders’ Equity

      27,915      25,445 
      

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

    $ 53,833    $       47,416 
      
               

 

5

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

 

     Six Months Ended November 30,
        2009    2008

Cash Flows From Operating Activities:

      

Net income

    $ 2,582      $ 2,373  

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

      

Depreciation

      123        134  

Amortization of intangible assets

      867        839  

Deferred income taxes

      (216)       (151) 

Stock-based compensation

      188        186  

Tax benefits on the exercise of stock options

      71        121  

Excess tax benefits on the exercise of stock options

      (42)       (79) 

Other, net

      56        39  

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

      

Decrease in trade receivables, net

      1,437        1,642  

Decrease in prepaid expenses and other assets

      235        388  

Decrease in accounts payable and other liabilities

      (523)       (1,022) 

Increase (decrease) in income taxes payable

      59        (273) 

Decrease in deferred revenues

      (448)       (207) 
      

Net cash provided by operating activities

      4,389        3,990  
      

Cash Flows From Investing Activities:

      

Purchases of marketable securities and other investments

      (6,185)       (5,105) 

Proceeds from maturities and sales of marketable securities and other investments

      4,088        4,362  

Acquisitions, net of cash acquired

      (392)       (1,065) 

Capital expenditures

      (100)       (399) 
      

Net cash used for investing activities

      (2,589)       (2,207) 
      

Cash Flows From Financing Activities:

      

Payments for repurchases of common stock

      (496)       (2,344) 

Proceeds from issuances of common stock

      371        371  

Payment of dividends to stockholders

      (501)       —  

Proceeds from borrowings, net of issuance costs

      4,461        —  

Repayments of borrowings

      —        (4) 

Excess tax benefits on the exercise of stock options

      42        79  

Distributions to noncontrolling interests

      (34)       (30) 
      

Net cash provided by (used for) financing activities

      3,843        (1,928) 
      

Effect of exchange rate changes on cash and cash equivalents

      281        (764) 
      

Net increase (decrease) in cash and cash equivalents

      5,924        (909) 
      

Cash and cash equivalents at beginning of period

      8,995        8,262  
      

Cash and cash equivalents at end of period

    $ 14,919      $ 7,353  
      
               

 

6

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

FREE CASH FLOW—TRAILING 4-QUARTERS (1)

($ in millions)

 

     Fiscal 2009     Fiscal 2010
     Q1     Q2     Q3     Q4     Q1     Q2             Q3                    Q4        
 

 

GAAP Operating Cash Flow

   

 

$

 

        7,941

 

  

  

 

$

 

        8,089

 

  

  

 

$

 

        8,542

 

  

  

 

$

 

        8,255

 

  

  

 

$

 

        8,753

 

  

   $         8,654        

Capital Expenditures (2)

      (479 )      (486 )      (539 )      (529 )      (261 )      (230 )      
      

 

Free Cash Flow

  

 

$

 

7,462

 

  

  

 

$

 

7,603

 

  

  

 

$

 

8,003

 

  

  

 

$

 

7,726

 

  

  

 

$

 

8,492

 

  

   $ 8,424        
      

 

% Growth over prior year

 

   

 

 

 

 

20

 

 

% 

 

  

 

 

 

 

15

 

 

% 

 

  

 

 

 

 

14

 

 

% 

 

  

 

 

 

 

8

 

 

% 

 

  

 

 

 

 

14

 

 

% 

 

  

 

 

 

 

11

 

 

% 

 

     
 

 

GAAP Net Income

  

 

$

 

5,758

 

  

  

 

$

 

5,750

 

  

  

 

$

 

5,739

 

  

  

 

$

 

5,593

 

  

  

 

$

 

5,640

 

  

   $ 5,802        

 

Free Cash Flow as a % of Net Income

   

 

 

 

130

 

% 

  

 

 

 

132

 

% 

  

 

 

 

139

 

% 

  

 

 

 

138

 

% 

  

 

 

 

151

 

% 

     145 %      

 

 

(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 on our cash flow statements presented in accordance with GAAP.

 

7

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

($ in millions)

 

     Fiscal 2009    Fiscal 2010
     Q1    Q2    Q3    Q4    TOTAL    Q1      Q2        Q3        Q4      TOTAL
 

REVENUES

                              

New software licenses

    $ 1,237    $ 1,626    $ 1,516    $ 2,744    $ 7,123    $ 1,028    $ 1,653          $ 2,681

Software license updates and product support

      2,935      2,850      2,917      3,052      11,754      3,117      3,247            6,364
      

Software Revenues

      4,172      4,476      4,433      5,796      18,877      4,145      4,900            9,045

Consulting

      865      842      758      782      3,247      663      692            1,355

On Demand

      195      189      191      204      779      180      188            368

Education

      99      100      71      79      349      66      78            143
      

Services Revenues

      1,159      1,131      1,020      1,065      4,375      909      958            1,866
      

Total Revenues

    $ 5,331    $ 5,607    $ 5,453    $ 6,861    $ 23,252    $ 5,054    $ 5,858          $ 10,911
      

 

AS REPORTED REVENUE GROWTH RATES

                              

New software licenses

      14%      (3%)      (6%)      (13%)      (5%)      (17%)      2%            (6%)

Software license updates and product support

      23%      14%      11%      8%      14%      6%      14%            10% 

Software Revenues

      20%      8%      5%      (3%)      6%      (1%)      9%            5% 

 

Consulting

      8%      (4%)      (10%)      (18%)      (7%)      (23%)      (18%)            (21%)

On Demand

      23%      13%      10%      5%      12%      (8%)      (1%)            (4%)

Education

      (2%)      (9%)      (23%)      (30%)      (16%)      (34%)      (22%)            (28%)

Services Revenues

      9%      (2%)      (8%)      (16%)      (5%)      (22%)      (15%)            (19%)

 

Total Revenues

      18%      6%      2%      (5%)      4%      (5%)      4%            0% 

CONSTANT CURRENCY GROWTH RATES (2)

                              

New software licenses

      10%      5%      3%      (4%)      1%      (14%)      (5%)            (9%)

Software license updates and product support

      18%      20%      20%      18%      19%      11%      9%            10% 

Software Revenues

      16%      14%      14%      6%      12%      4%      4%            4% 

Consulting

      5%      4%      0%      (10%)      (1%)      (19%)      (22%)            (21%)

On Demand

      19%      19%      19%      15%      18%      (3%)      (4%)            (4%)

Education

      (6%)      (3%)      (16%)      (23%)      (12%)      (30%)      (26%)            (28%)

Services Revenues

      6%      5%      2%      (7%)      1%      (18%)      (19%)            (18%)

Total Revenues

      14%      12%      11%      4%      10%      (1%)      0%            (1%)
 

 

GEOGRAPHIC REVENUES

 

                              

REVENUES

                              

Americas

    $ 2,687    $ 2,904    $ 2,846    $ 3,463    $ 11,900    $ 2,671    $ 2,979          $ 5,650

Europe, Middle East & Africa

      1,830      1,881      1,824      2,413      7,948      1,642      1,976            3,618

Asia Pacific

      814      822      783      985      3,404      741      903            1,643
      

Total Revenues

    $ 5,331    $ 5,607    $ 5,453    $ 6,861    $ 23,252    $ 5,054    $ 5,858          $ 10,911
      
 

 

HEADCOUNT

 

                              

GEOGRAPHIC AREA

                              

Americas

      32,993      33,526      32,919      32,347         32,034      31,849         

Europe, Middle East & Africa

      17,096      17,184      17,348      17,129         16,839      16,491         

Asia Pacific

      35,099      35,947      36,321      36,086         35,766      35,026         
      

Total Company

      85,188      86,657      86,588      85,562         84,639      83,366         
      

 

 

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

 

(2) 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 rates in effect on May 31, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

8

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1)

($ in millions)

 

     Fiscal 2009     Fiscal 2010
        Q1     Q2     Q3     Q4     TOTAL     Q1     Q2       Q3        Q4      TOTAL

 

DATABASE & MIDDLEWARE REVENUES

 

                       

New software licenses

    $ 906      $ 1,157      $ 1,120      $ 1,939      $ 5,123      $ 711      $ 1,175            $ 1,886    

Software license updates and product support

      1,892        1,835        1,914        2,008        7,649        2,065        2,131              4,196    
      

Software Revenues

    $   2,798      $   2,992      $   3,034      $   3,947      $   12,772      $   2,776      $   3,306            $   6,082    
      

 

AS REPORTED GROWTH RATES

                       

New software licenses

      27 %      4 %      (4 %)      (10 %)      0 %      (22 %)      1 %            (9%) 

Software license updates and product support

      26 %      17 %      16 %      12 %      18 %      9 %      16 %            13%  

Software Revenues

      27 %      12 %      8 %      0 %      10 %      (1 %)      10 %            5%  

 

CONSTANT CURRENCY GROWTH RATES (2)

                       

New software licenses

      23 %      12 %      6 %      (1 %)      7 %      (19 %)      (5 %)            (11%) 

Software license updates and product support

      22 %      24 %      25 %      23 %      23 %      14 %      12 %            13%    

Software Revenues

      22 %      19 %      17 %      10 %      16 %      4 %      5 %            4%    
                                                                          

 

APPLICATIONS REVENUES

 

                       

New software licenses

    $ 331      $ 469      $ 396      $ 805      $ 2,000      $ 317      $ 478            $ 795    

Software license updates and product support

      1,043        1,015        1,003        1,044        4,105        1,052        1,116              2,168    
      

Software Revenues

    $ 1,374      $ 1,484      $ 1,399      $ 1,849      $ 6,105      $ 1,369      $ 1,594            $ 2,963    
      

 

AS REPORTED GROWTH RATES

                       

New software licenses

      (12 %)      (15 %)      (12 %)      (19 %)      (16 %)      (4 %)      2 %            (1%) 

Software license updates and product support

      18 %      9 %      3 %      0 %      7 %      1 %      10 %            5%  

Software Revenues

      9 %      0 %      (2 %)      (9 %)      (2 %)      0 %      7 %            4%  

 

CONSTANT CURRENCY GROWTH RATES (2)

                       

New software licenses

      (14 %)      (9 %)      (4 %)      (11 %)      (10 %)      0 %      (3 %)            (2%) 

Software license updates and product support

      13 %      15 %      11 %      9 %      12 %      6 %      6 %            6%  

Software Revenues

      5 %      6 %      7 %      (1 %)      4 %      4 %      3 %            3%  

 

 

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

 

(2) 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 rates in effect on May 31, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

9

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE REVENUE ANALYSIS (1)

($ in millions)

 

     Fiscal 2009     Fiscal 2010
        Q1     Q2     Q3     Q4     TOTAL     Q1     Q2       Q3        Q4      TOTAL

 

AMERICAS

 

                       

Database & Middleware

    $ 354      $ 471      $ 449      $ 840      $ 2,114      $ 310      $ 492            $ 802

Applications

      182        280        224        416        1,102        185        286              472
      

New Software License Revenues

    $ 536      $ 751      $ 673      $ 1,256      $ 3,216      $ 495      $ 778            $ 1,274
      

AS REPORTED GROWTH RATES

                       

Database & Middleware

      18 %      5 %      (7 %)      (9 %)      (2 %)      (12 %)      4 %            (3%)

Applications

      (9 %)      (9 %)      (11 %)      (25 %)      (16 %)      2 %      2 %            2%

New Software License Revenues

      7 %      0 %      (9 %)      (15 %)      (7 %)      (7 %)      4 %            (1%)

CONSTANT CURRENCY GROWTH RATES (2)

                       

Database & Middleware

      17 %      10 %      (1 %)      (6 %)      2 %      (11 %)      2 %            (3%)

Applications

      (10 %)      (6 %)      (8 %)      (22 %)      (14 %)      6 %      1 %            2%

New Software License Revenues

      6 %      3 %      (4 %)      (12 %)      (4 %)      (5 %)      1 %            (1%)
                                                                          

 

EUROPE / MIDDLE EAST / AFRICA

 

                       

Database & Middleware

    $ 326      $ 431      $ 446      $ 759      $ 1,962      $ 224      $ 429            $ 653

Applications

      94        126        125        282        627        90        119              209
      

New Software License Revenues

    $ 420      $ 557      $ 571      $ 1,041      $ 2,589      $ 314      $ 548            $ 862
      

AS REPORTED GROWTH RATES

                       

Database & Middleware

      28 %      2 %      0 %      (14 %)      (2 %)      (31 %)      (1 %)            (14%)

Applications

      (23 %)      (28 %)      (12 %)      (11 %)      (17 %)      (5 %)      (6 %)            (5%)

New Software License Revenues

      11 %      (7 %)      (3 %)      (13 %)      (6 %)      (25 %)      (2 %)            (12%)

CONSTANT CURRENCY GROWTH RATES (2)

                       

Database & Middleware

      20 %      16 %      15 %      1 %      10 %      (26 %)      (10 %)            (16%)

Applications

      (26 %)      (16 %)      2 %      5 %      (6 %)      3 %      (14 %)            (8%)

New Software License Revenues

      5 %      7 %      12 %      2 %      6 %      (20 %)      (11 %)            (14%)
                                                                          

 

ASIA PACIFIC

 

                       

Database & Middleware

    $ 226      $ 255      $ 225      $ 340      $ 1,047      $ 177      $ 254            $ 431

Applications

      55        63        47        107        271        42        73              114
      

New Software License Revenues

    $ 281      $ 318      $ 272      $ 447      $ 1,318      $ 219      $ 327            $ 545
      

AS REPORTED GROWTH RATES

                       

Database & Middleware

      45 %      4 %      (3 %)      (1 %)      7 %      (22 %)      0 %            (10%)

Applications

      1 %      (13 %)      (18 %)      (11 %)      (11 %)      (24 %)      17 %            (2%)

New Software License Revenues

      34 %      0 %      (6 %)      (3 %)      3 %      (22 %)      3 %            (9%)

CONSTANT CURRENCY GROWTH RATES (2)

                       

Database & Middleware

      38 %      8 %      1 %      5 %      11 %      (22 %)      (10 %)            (16%)

Applications

      (1 %)      (2 %)      (2 %)      (4 %)      (3 %)      (23 %)      2 %            (9%)

New Software License Revenues

      28 %      5 %      1 %      3 %      7 %      (22 %)      (8 %)            (15%)
                                                                          

 

TOTAL COMPANY

 

                       

Database & Middleware

    $ 906      $ 1,157      $ 1,120      $ 1,939      $ 5,123      $ 711      $ 1,175            $ 1,886

Applications

      331        469        396        805        2,000        317        478              795
      

New Software License Revenues

    $   1,237      $   1,626      $   1,516      $   2,744      $   7,123      $   1,028      $   1,653            $ 2,681
      

AS REPORTED GROWTH RATES

                       

Database & Middleware

      27 %      4 %      (4 %)      (10 %)      0 %      (22 %)      1 %            (9%)

Applications

      (12 %)      (15 %)      (12 %)      (19 %)      (16 %)      (4 %)      2 %            (1%)

New Software License Revenues

      14 %      (3 %)      (6 %)      (13 %)      (5 %)      (17 %)      2 %            (6%)

CONSTANT CURRENCY GROWTH RATES (2)

                       

Database & Middleware

      23 %      12 %      6 %      (1 %)      7 %      (19 %)      (5 %)            (11%)

Applications

      (14 %)      (9 %)      (4 %)      (11 %)      (10 %)      0 %      (3 %)            (2%)

New Software License Revenues

      10 %      5 %      3 %      (4 %)      1 %      (14 %)      (5 %)            (9%)

 

 

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

 

(2) 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 rates in effect on May 31, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

10

APPENDIX A

 

ORACLE CORPORATION

Q2 FISCAL 2010 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, 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 effects:

 

•  

Support deferred revenue: Business combination accounting rules require us to account for the fair value of support contracts assumed in connection with our acquisitions. Because these are typically one-year contracts, our GAAP revenues for the one year period subsequent to our acquisition of a business do not reflect the full amount of software license updates and product support revenues on assumed support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment is intended to reflect the full amount of such revenues. 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 certain that customers will renew these contracts.

 

•  

Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, 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 intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well. Amortization of intangible assets will recur in future periods.

 

•  

Acquisition related and other expenses, and restructuring expenses: We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments after the measurement period or purchase price allocation period has ended and certain other operating expenses, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses are not recurring with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.

 

11