Oracle Reports Q2 EPS Up 35 Percent to 16 Cents, Net Income Up 32 Percent

Oracle Reports Q2 EPS Up 35 Percent to 16 Cents, Net Income Up 32 Percent

Applications New Software License Sales Up 57 Percent

REDWOOD SHORES, Calif., Dec. 13 /PRNewswire-FirstCall/ -- Oracle Corporation (NASDAQ:ORCL) today announced that second quarter earnings per share increased 35 percent to $0.16, compared to $0.12 last year. Net income grew 32 percent to $815 million in the quarter while total revenues were up 10 percent to $2.76 billion.

Second quarter software revenues were up 13 percent to $2.22 billion while services revenues grew 1 percent to $533 million. New software license sales were up 14 percent to $971 million lead by a 57 percent increase in new applications sales. Software license updates and product support increased 12 percent to $1.25 billion. Second quarter operating margin rose to 41 percent versus 37 percent last year.

"Oracle is at its highest ever levels of profitability," said Oracle CFO Harry L. You. "For the trailing four quarters operating income reached a record $4.2 billion while cash flow was at $3.4 billion. During that same twelve-month period we met our publicly stated goal of 40 percent operating margins for the very first time."

"Last week, a record 25,000 users and partners attended our Oracle OpenWorld conference," said CEO Larry Ellison. "We used this opportunity to demonstrate advanced versions of our database grid technology, application server middleware, collaboration suite and enterprise application suite. Never in Oracle's history have we had such a broad and competitive set of software products. Based on the reaction from our users, Oracle's future looks even brighter than our past."

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

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Information in this release relating to Oracle's future prospects, which are "forward-looking statements" are subject to certain risks and uncertainties that could cause actual results to differ materially, including, but not necessarily limited to, the following: (1) Economic, political and market conditions could adversely affect purchasing decisions for computer software and services throughout the world. The war on terrorism and the potential for other hostilities in various parts of the world continue to contribute to a climate of economic and political uncertainty that could adversely affect revenues. Delays in closing of transactions, reductions in size of individual transactions without an offsetting increase in volume, unanticipated fluctuations in currency exchange rates, delays in product delivery, or a decline in our renewal rates for software license updates and product support can cause quarterly revenues and income to fall short of anticipated levels. (2) Management's ability to forecast revenues and control expenses, especially on a quarterly basis, continues to be a challenge. An unexpected decline in revenues without a corresponding and timely slowdown in expense growth could have a material adverse effect on results of operations. (3) Oracle continues to introduce new or enhanced versions of its products and services, such as Oracle Database 10g, Oracle Application Server 10g, Oracle E-Business Suite, Oracle Collaboration Suite, Oracle Customer Data Hub and Oracle On Demand. The market acceptance and contribution to Oracle's revenues of these new versions or products and services cannot be assured. (4) Oracle periodically has made changes to its pricing model and sales organization, which could lead to a decline or delay in sales as its sales force and customers adjust to the new pricing policies and organizational changes. Intense competition in the various markets in which Oracle competes may also put pressure on Oracle to reduce prices. (5) The market for Oracle's products is intensely competitive and is characterized by rapid technological advances and frequent new product introductions. There can be no assurances that Oracle will continue to introduce new products and new versions of existing products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. (6) We have publicly announced our intention to acquire complementary businesses and technologies. Our inability to integrate any such acquisitions quickly and efficiently with our existing business could have a material adverse effect on our business, results of operations, financial condition or cash flows. All information set forth in this release is current as of December 13, 2004. Oracle undertakes no duty to update any statement in light of new information or future events. For further information regarding risks and uncertainties associated with Oracle's business, please refer to the "Risk Factors" section of Oracle Corporation's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or Oracle's Investor Relations website at http://www.oracle.com/investor.

ORACLE CORPORATION

Q2 FISCAL 2005 QUARTER TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)

Three Months Ended November 30,
2004 % of 2003 % of % %
Revenues Revenues Increase Increase
(Decrease)(Decrease)
in US $ in Local
Currency
(1)
REVENUES
New software licenses $971 35% $855 34% 14% 9%
Software license updates
and product support 1,252 46% 1,114 45% 12% 8%
Software Revenues 2,223 81% 1,969 79% 13% 8%
Services 533 19% 529 21% 1% (3%)
Total Revenues 2,756 100% 2,498 100% 10% 6%

OPERATING EXPENSES
Sales and marketing 555 20% 525 21% 6% 2%
Software license updates
and product support 141 5% 143 6% (1%) (5%)
Cost of services 449 16% 455 18% (1%) (5%)
Research and development 327 12% 323 13% 1% 0%
General and
administrative(2) 153 6% 137 5% 12% 8%
Total Operating
Expenses 1,625 59% 1,583 63% 3% (1%)
OPERATING INCOME 1,131 41% 915 37% 24% 17%
Other income, net 23 1% 1 0% * *
INCOME BEFORE TAXES 1,154 42% 916 37% 26% 20%
Provision for
income taxes 339 12% 299 12% 13% 12%
NET INCOME $815 30% $617 25% 32% 23%
EARNINGS PER SHARE
Basic $0.16 $0.12 35%
Diluted $0.16 $0.12 35%

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 5,123 5,226 (2%)
Diluted 5,218 5,337 (2%)

* not meaningful

(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 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 the last day of the prior fiscal
year, rather than the actual exchange rates in effect during the
current period. The United States dollar weakened relative to major
international currencies in the three months ended November 30, 2004
compared with the corresponding prior year period, contributing 4
percentage points of revenue growth, 4 percentage points to the
increase in operating expenses, and 7 percentage points of operating
income growth.

(2) General and administrative expenses for the three months ended
November 30, 2004 and November 30, 2003 include $23.3 million and
$13.8 million of professional fees associated with our tender offer
for PeopleSoft, Inc.


ORACLE CORPORATION

Q2 FISCAL 2005 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)

Six Months Ended November 30,
2004 % of 2003 % of % %
Revenues Revenues Increase Increase
(Decrease)(Decrease)
in US $ in Local
Currency
(1)

REVENUES
New software
licenses $1,534 31% $1,380 30% 11% 7%
Software license updates
and product support 2,427 49% 2,148 47% 13% 9%
Software Revenues 3,961 80% 3,528 77% 12% 8%
Services 1,010 20% 1,042 23% (3%) (7%)
Total Revenues 4,971 100% 4,570 100% 9% 5%

OPERATING EXPENSES
Sales and marketing 1,035 21% 989 22% 5% 1%
Software license updates
and product support 277 6% 264 6% 5% 1%
Cost of services 868 17% 897 19% (3%) (7%)
Research and development 639 13% 621 14% 3% 2%
General and
administrative(2) 307 6% 268 6% 15% 11%
Total Operating
Expenses 3,126 63% 3,039 67% 3% 0%
OPERATING INCOME 1,845 37% 1,531 33% 21% 15%
Other income, net(3) 47 1% 49 1% (4%) (5%)
INCOME BEFORE TAXES 1,892 38% 1,580 34% 20% 14%
Provision for
income taxes 568 11% 523 11% 9% 7%
NET INCOME $1,324 27% $1,057 23% 25% 18%

EARNINGS PER SHARE
Basic $0.26 $0.20 27%
Diluted $0.25 $0.20 28%

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 5,139 5,228 (2%)
Diluted 5,229 5,342 (2%)


(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
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 the last day of the prior fiscal year,
rather than the actual exchange rates in effect during the current
period. The United States dollar weakened relative to major
international currencies in the six months ended November 30, 2004
compared with the corresponding prior year period, contributing 4
percentage points of revenue growth, 3 percentage points to the
increase in operating expenses, and 6 percentage points of operating
income growth.

(2) General and administrative expenses for the six months ended
November 30, 2004 and November 30, 2003 include $51.8 million and
$28.4 million of professional fees associated with our tender offer
for PeopleSoft, Inc.

(3) Other income, net for the six months ended November 30, 2003 includes
a $35.4 million gain related to the sale of all of our common shares
in Liberate Technologies to a third-party for approximately
$83.5 million and $5.0 million related to a commitment fee for a
revolving credit facility associated with our tender offer for
PeopleSoft, Inc.


ORACLE CORPORATION

Q2 FISCAL 2005 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)

November 30, May 31,
2004 2004

ASSETS

Current Assets:
Cash and cash equivalents $5,905 $4,138
Short-term investments 3,531 4,449
Trade receivables, net 1,532 2,012
Deferred tax assets 298 301
Other current assets 307 436
Total Current Assets 11,573 11,336

Non-Current Assets:
Property, net 1,084 1,068
Deferred tax assets 81 92
Other assets 399 267
Total Non-Current Assets 1,564 1,427

TOTAL ASSETS $13,137 $12,763

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $9 $9
Accounts payable 260 191
Income taxes payable 904 950
Other current liabilities 1,314 1,625
Deferred revenues 1,497 1,497
Total Current Liabilities 3,984 4,272

Non-Current Liabilities:
Long-term debt 162 163
Deferred tax liabilities 17 59
Other long-term liabilities 375 274
Total Non-Current Liabilities 554 496
Stockholders' Equity 8,599 7,995

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,137 $12,763


ORACLE CORPORATION

Q2 FISCAL 2005 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)

Six Months Ended
November 30,
2004 2003(1)
Cash Flows From Operating
Activities:
Net income $1,324 $1,057
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 89 100
Amortization of intangible assets 16 21
Net investment gains related to
equity securities (1) (32)
Deferred income taxes (28) 20
Minority interests in income 19 23
Changes in assets and liabilities:
Decrease in trade receivables 527 389
Decrease in other assets 153 80
Decrease in accounts payable and
other liabilities (275) (139)
Increase in income taxes payable 24 135
Decrease in deferred revenues (49) (46)
Net cash provided by operating
activities 1,799 1,608
Cash Flows From Investing
Activities:
Purchases of investments (5,097) (5,252)
Proceeds from maturities and sale
of investments 6,011 3,397
Capital expenditures (92) (103)
Increase in other assets (4) (8)
Net cash provided by (used for)
investing activities 818 (1,966)
Cash Flows From Financing
Activities:
Payments for repurchase of common
stock (1,095) (399)
Proceeds from issuance of common
stock 165 176
Distributions to minority
interests (26) (21)
Net cash used for financing
activities (956) (244)
Effect of exchange rate changes on
cash and cash equivalents 106 38
Net increase (decrease) in cash
and cash equivalents 1,767 (564)
Cash and cash equivalents at
beginning of period 4,138 4,737
Cash and cash equivalents at end
of period $5,905 $4,173

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


ORACLE CORPORATION
Q2 FISCAL 2005 FINANCIAL RESULTS
FREE CASH FLOW - TRAILING TWELVE MONTHS (1)
($ in millions)

Fiscal 2004 Fiscal 2005
Q1(2) Q2(2) Q3(2) Q4 Q1 Q2(3) Q3 Q4

GAAP Operating
Cash Flow $3,074 $3,172 $3,003 $3,195 $3,350 $3,386

Capital
Expenditures(4) (324) (319) (347) (189) (147) (178)

Free Cash Flow $2,750 $2,853 $2,656 $3,006 $3,203 $3,208

% Growth (5)% (3)% (12)% 9% 16% 12%

GAAP Net Income $2,404 $2,486 $2,550 $2,682 $2,749 $2,948

Free Cash Flow
as a % of
Net Income 114% 115% 104% 112% 116% 109%


(1) We believe reporting free cash flow provides more visibility to our
ability to generate cash. We believe that this measure is also useful
to investors as one of the bases for comparing our operating
performance with our competitors. We evaluate free cash flow over a
trailing twelve month period versus on a quarterly basis, as we manage
our business on an annual basis. Free cash flow is not a measure of
financial performance under U.S. generally accepted accounting
principles and should not 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. The reconciliation of free cash flow to GAAP operating cash
flow is provided above. Certain prior period balances have been
reclassified to conform to the current period presentation.
(2) Capital expenditures included $168.3 million related to the purchase
of land and office buildings previously leased in the fourth quarter
of fiscal 2003.
(3) The first half of fiscal 2005 had 13% growth in free cash flow over
the first half of fiscal 2004 and 129% in free cash flow as a percent
of GAAP net income.


First Half First Half
Fiscal 2004 Fiscal 2005

GAAP Operating Cash Flow $1,608 $1,799
Capital Expenditures (103) (92)
Free Cash Flow $1,505 $1,707
% Growth 7% 13%
GAAP Net Income $1,057 $1,324
Free Cash Flow as a % of Net Income 142% 129%


(4) 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
Q2 FISCAL 2005 FINANCIAL RESULTS
CURRENCY EFFECT ON REVENUE GROWTH

Fiscal 2004
Q1 Q2 Q3 Q4 Total
Currency Effect on Revenue
Growth(1)

Americas 0.50% 1.41% 1.28% 0.13% 0.80%
Europe, Middle East & Africa 11.92% 13.50% 15.01% 7.44% 11.80%
Asia Pacific 2.88% 9.68% 9.33% 7.24% 7.40%
Total Worldwide 4.06% 7.32% 7.09% 3.84% 5.56%

USD vs. Major Currencies(2)

Euro 1.127 1.168 1.255 1.205 1.193
British Pound 1.613 1.690 1.840 1.809 1.745
Japanese Yen 0.008 0.009 0.009 0.009 0.009


Fiscal 2005
Q1 Q2 Q3Fcst Q4 Total

Currency Effect on Revenue
Growth(1)
Americas 0.09% 0.54% 0.76% 0.49%
Europe, Middle East & Africa 7.75% 10.23% 7.57% 8.62%
Asia Pacific 5.33% 3.77% 4.22% 4.42%
Total Worldwide 3.60% 4.36% 3.76% 3.94%

USD vs. Major Currencies(2)

Euro 1.208 1.282 1.343 1.283
British Pound 1.812 1.850 1.945 1.870
Japanese Yen 0.009 0.009 0.010 0.009

(1) Currency exchange growth is based on blended currencies in
each geographical division and their respective revenue levels.
(2) Currency exchange rates are based on monthly exchange rates
within the period and are weighted on revenue levels within the
period.
1 foreign currency = x USD.


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Source: Oracle Corporation

CONTACT: Nancy C. Lee, Investor Relations, +1-650-506-4073, or Jim Finn,
Corporate Communications, +1-212-508-7760, both of Oracle Corporation

Web site: http://www.oracle.com/


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