ORACLE CORP /DE/, 10-Q, 1995-12-26

ORACLE CORP /DE/
10-Q, 1995-12-26
PREPACKAGED SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

<TABLE>
<S> <C>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED NOVEMBER 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
.
</TABLE>

COMMISSION FILE NUMBER: 0-14376

ORACLE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 94-2871189
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>

500 ORACLE PARKWAY
REDWOOD CITY, CALIFORNIA 94065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(415) 506-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Number of shares of registrant's common stock outstanding as of November 30,
1995: 435,304,173.

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ORACLE CORPORATION

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at November 30, 1995 and May 31,
1995.................................................................... 3
Condensed Consolidated Statements of Operations for the three months and
six months ended November 30, 1995 and 1994............................. 4
Condensed Consolidated Statements of Cash Flows for the six months ended
November 30, 1995 and 1994.............................................. 5
Notes to Condensed Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders..................... 11
Item 6. Exhibits and Reports on Form 8-K........................................ 11
Signatures.............................................................. 12
</TABLE>

2
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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
1995 1995
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 497,726 $ 480,158
Short-term cash investments...................................... 56,736 105,660
Trade receivables, net of allowance for doubtful accounts of
$66,884 and $67,728, respectively............................. 766,918 764,734
Prepaid and refundable income taxes.............................. 131,626 135,491
Other current assets............................................. 138,405 131,151
---------- ----------
Total current assets..................................... 1,591,411 1,617,194
---------- ----------
LONG-TERM CASH INVESTMENTS......................................... 7,626 --
PROPERTY, net...................................................... 602,993 535,034
COMPUTER SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $93,947 and $70,515, respectively................ 99,299 99,855
OTHER ASSETS....................................................... 228,964 172,434
---------- ----------
Total assets............................................. $2,530,293 $2,424,517
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks........................................... $ 7,772 $ 6,221
Current maturities of long-term debt............................. 2,123 3,378
Accounts payable................................................. 129,244 124,773
Income taxes..................................................... 83,189 134,121
Accrued compensation and related benefits........................ 164,759 211,643
Customer advances and unearned revenues.......................... 301,568 316,273
Value added tax and sales tax payable............................ 49,362 67,449
Other accrued liabilities........................................ 218,404 191,291
---------- ----------
Total current liabilities................................ 956,421 1,055,149
---------- ----------
LONG-TERM DEBT..................................................... 81,243 81,721
OTHER LONG-TERM LIABILITIES........................................ 11,437 10,361
DEFERRED INCOME TAXES.............................................. 19,496 27,490
PUT WARRANTS....................................................... -- 38,438
STOCKHOLDERS' EQUITY............................................... 1,461,696 1,211,358
---------- ----------
Total liabilities and stockholders' equity............... $2,530,293 $2,424,517
========== ==========
</TABLE>

See notes to condensed consolidated financial statements.

3
<PAGE> 4

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
--------------------- -------------------------
1995 1994 1995 1994
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Licenses and other......................... $502,948 $362,524 $ 868,668 $ 657,753
Services................................... 464,236 307,756 870,319 569,001
-------- -------- ---------- ----------
Total revenues..................... 967,184 670,280 1,738,987 1,226,754
-------- -------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing........................ 356,650 244,067 635,673 461,989
Cost of services........................... 255,422 187,578 486,931 344,101
Research and development................... 93,272 57,226 177,713 112,383
General and administrative................. 57,228 43,477 108,936 82,806
Acquired in-process research and
development............................. -- -- 50,931 --
-------- -------- ---------- ----------
Total operating expenses........... 762,572 532,348 1,460,184 1,001,279
-------- -------- ---------- ----------
OPERATING INCOME............................. 204,612 137,932 278,803 225,475
Other income (expense), net................ 2,814 2,166 10,082 5,966
-------- -------- ---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES............................... 207,426 140,098 288,885 231,441
Provision for income taxes................. 70,525 46,232 98,221 76,375
-------- -------- ---------- ----------
NET INCOME................................... $136,901 $ 93,866 $ 190,664 $ 155,066
======== ======== ========== ==========
EARNINGS PER SHARE........................... $ 0.31 $ 0.21 $ 0.43 $ 0.35
======== ======== ========== ==========
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING......................... 447,140 443,433 446,829 443,340
======== ======== ========== ==========
</TABLE>

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 AND 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ 190,664 $ 155,066
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 104,847 65,108
Write-off of acquired in-process research and development....... 50,931 --
Provision for doubtful accounts................................. 27,991 20,965
Increase in trade receivables................................... (36,522) (88,858)
(Increase) decrease in prepaid and refundable income taxes...... 3,263 (14,209)
Increase in other current assets................................ (13,127) (2,184)
Increase in accounts payable.................................... 5,879 30,053
Decrease in income taxes........................................ (42,407) (8,055)
Increase (decrease) in customer advances and unearned
revenues....................................................... (11,343) 6,534
Increase (decrease) in other accrued liabilities................ (30,365) 10,125
Increase (decrease) in other long-term liabilities.............. 1,076 (3,057)
Decrease in deferred income taxes............................... (8,090) (5,036)
--------- ---------
Net cash provided by operating activities.......................... 242,797 166,452
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in cash investments......................... 41,298 (48,402)
Capital expenditures, net....................................... (140,617) (107,942)
Capitalization of computer software development costs........... (25,350) (22,585)
Increase in other assets........................................ (107,137) (127,299)
--------- ---------
Net cash used for investing activities............................. (231,806) (306,228)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings on debt obligations................... (200) 115
Proceeds from common stock issued............................... 42,612 27,015
Repurchase of common stock...................................... (48,580) (75,855)
Proceeds from sales of call options............................. 17,175 --
--------- ---------
Net cash provided by (used for) financing activities............... 11,007 (48,725)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............................. (4,430) 4,788
--------- ---------
Net increase (decrease) in cash and cash equivalents............... 17,568 (183,713)
CASH AND CASH EQUIVALENTS:
Beginning of period................................................ 480,158 404,810
--------- ---------
End of period...................................................... $ 497,726 $ 221,097
========= =========
</TABLE>

See notes to condensed consolidated financial statements.

5
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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended May 31, 1995.

The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
six month period ended November 30, 1995. The results for the six month period
ended November 30, 1995 are not necessarily indicative of the results expected
for the full fiscal year.

2. EARNINGS PER SHARE

Earnings per share was computed based on the weighted average number of common
and common equivalent shares outstanding during the period. Common equivalent
shares are calculated using the treasury stock method and represent shares
issuable upon the exercise of outstanding stock options.

3. ACQUISITIONS

On July 27, 1995, the Company completed the acquisition of the on-line
analytical processing business of Information Resources, Inc. for $100 million
in cash. The Company received an appraisal of certain intangible assets which
indicated that $50,931,000 of the acquired intangible assets consisted of
in-process research and development. In the opinion of management and the
appraiser, the acquired in-process research and development had not yet reached
technological feasibility and had no alternative future uses. Accordingly, the
Company recorded a special charge of $50,931,000 in the accompanying condensed
consolidated statement of operations for the first quarter of fiscal 1996.
Amortization expense of approximately $2 million was charged to general and
administrative expenses in the accompanying condensed consolidated statement of
operations in the first six months of fiscal 1996. Pending the final allocation
of the purchase price, the remaining $47 million of the purchase price is being
amortized over a five year period.

On November 30, 1994, the Company completed the acquisition of the Rdb database
and repository businesses of Digital Equipment Corporation, including all
related software products and customer support services for $108 million in
cash. Intangible assets, with an assigned value of approximately $105 million,
have been included in Other Assets in the accompanying condensed consolidated
balance sheet. These intangible assets relate to the value assigned to the Rdb
database and repository businesses installed base and related technologies and
are being amortized over a seven year period. Amortization expense of
approximately $8 million was charged to cost of services in the accompanying
condensed consolidated statement of operations in the first six months of fiscal
1996.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

Domestic revenues increased 44% and 45% in the second quarter and first half of
fiscal 1996, respectively, while international revenues increased 44% and 40% in
the second quarter and first half of fiscal 1996, respectively, as compared to
the corresponding periods in fiscal 1995. International revenues were favorably
affected in the second quarter and first half of fiscal 1996 when compared to
the corresponding periods of the

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prior year as a result of the weakening of the U. S. dollar against certain
major international currencies. International revenues expressed in local
currency increased in the second quarter and first half of fiscal 1996 by
approximately 42% and 36%, respectively, from the corresponding periods of
fiscal 1995. International revenues constituted approximately 60% of total
revenues in the second quarters of both fiscal 1996 and 1995 and 59% and 60% of
total revenues in the first half of fiscal 1996 and 1995, respectively.
Management expects that the Company's international operations will continue to
provide a significant portion of total revenues. However, international revenues
will be adversely affected if the U.S. dollar strengthens against certain major
international currencies.

REVENUES:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- ------------------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1995 CHANGE 1994 1995 CHANGE 1994
-------- ------ -------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Licenses and
other........... $502,948 39% $362,524 $ 868,668 32% $ 657,753
Percentage of
revenues........ 52.0% 54.1% 50.0% 53.6%
Services.......... $464,236 51% $307,756 $ 870,319 53% $ 569,001
Percentage of
revenues........ 48.0% 45.9% 50.0% 46.4%
Total revenues.... $967,184 44% $670,280 $1,738,987 42% $1,226,754
</TABLE>

LICENSES AND OTHER REVENUES. License revenues represent fees earned for granting
customers licenses to use the Company's software products. License revenues also
include revenues from the Company's systems integration business, documentation
revenues, certain software development revenues and other miscellaneous
revenues. The Company experienced quarterly license and other revenue growth
rates ranging from 36% to 49% during the four quarters of fiscal 1995 as
compared to the comparable four quarters of fiscal 1994. The Company believes
that these strong growth rates were due primarily to an overall increase in
market demand for database and related products and increased market acceptance
of the Company's relational DBMS and applications products and the addition of
revenues generated from the acquisition of the Rdb and repository businesses of
Digital Equipment Corporation and the on-line analytical processing business of
Information Resources, Inc. The Company believes that the license and other
growth rate of 39% experienced in the second quarter of fiscal 1996 reflects a
continuation during the second quarter of the trend experienced in fiscal 1995.
The lower license and other growth rate experienced in the first half of fiscal
1996 was due primarily to weaknesses in first quarter revenues in certain
countries, most notably in Europe, as well as fewer identified license
opportunities at the beginning of the first quarter of fiscal 1996 as a result
of the strong results realized in the fourth quarter of fiscal 1995 when the
license growth rate was 49% as compared to fiscal 1994.

SERVICE REVENUES. Support, consulting and education services revenues each
increased from the corresponding periods of fiscal 1995. The Company's support
revenues continued to constitute the largest portion of service revenues in the
second quarter and first half of fiscal 1996. Support revenues grew 60% and 61%
in the second quarter and first half of fiscal 1996. This growth reflects the
continued increase in the installed base of the Company's products under support
contracts and support revenues associated with the recently acquired Rdb and
repository businesses of Digital Equipment Corporation and the on-line
analytical processing business of Information Resources, Inc. Consulting and
education services grew 44% and 46% in the second quarter and first half of
fiscal 1996 when compared to the corresponding periods in fiscal 1995. The
Company continued to expand its services to assist customers in the use and
implementation of applications based on the Company's products.

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OPERATING EXPENSES:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- --------------------------------
NOV 30, NOV 30, NOV 30, NOV 30,
1995 CHANGE 1994 1995 CHANGE 1994
-------- ------ -------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing......... $356,650 46% $244,067 $ 635,673 38% $ 461,989
Percentage of revenues...... 36.9% 36.4% 36.6% 37.7%
Cost of services............ $255,422 36% $187,578 $ 486,931 42% $ 344,101
Percentage of revenues...... 26.4 % 28.0% 28.0% 28.0%
Research and development
(1)....................... $ 93,272 63% $ 57,226 $ 177,713 58% $ 112,383
Percentage of revenues...... 9.6% 8.5% 10.2% 9.2%
General and
administrative............ $ 57,228 32% $ 43,477 $ 108,936 32% $ 82,806
Percentage of revenues...... 5.9% 6.5% 6.3% 6.8%
Acquired in-process research
and development........... $ -- -- $ -- $ 50,931 * $ --
Percentage of revenues...... -- -- 2.9% --
</TABLE>

- ---------------
* Not meaningful

(1) Pursuant to Statement of Financial Accounting Standards No. 86, the Company
capitalized software development costs equal to 1.3% and 1.8% of total
revenues during the second quarters of fiscal 1996 and 1995, respectively,
and 1.5% and 1.8% of total revenues in the first half of fiscal 1996 and
1995, respectively.

International expenses were unfavorably affected in the second quarter and first
half of fiscal 1996 when compared to the corresponding periods in the prior year
due to changes in the value of the U. S. dollar against certain major
international currencies.

SALES AND MARKETING EXPENSES. The Company continues to place significant
emphasis, both domestically and internationally, on direct sales through its own
sales force. However, the Company also continues to emphasize marketing its
products through indirect channels in order to increase market share while
reducing distribution costs. As a percentage of total revenues, sales and
marketing expenses increased in the second quarter of fiscal 1996 when compared
to the corresponding period of fiscal 1995 primarily due to aggressive hiring of
sales personnel and marketing program expenditures. As a percentage of total
revenues, sales and marketing expenses decreased in the first half of fiscal
1996 when compared to the corresponding period in fiscal 1995. This decrease was
primarily due to revisions made in the first quarter of fiscal 1996 to certain
prior fiscal year compensation-related accruals that resulted from changes in
the amounts of estimated liabilities based on actual payments made and, to a
lesser extent, due to increased revenue levels. Included in sales and marketing
expenses is the amortization of capitalized software development costs (see
below).

COST OF SERVICES. The cost of providing services consists largely of consulting,
education, and support personnel expenses. As a percentage of service revenues,
cost of services was 55% and 61% of revenues in the second quarters of fiscal
1996 and 1995, respectively, and decreased to 56% in the first half of fiscal
1996 from 60% in the corresponding period in fiscal 1995. The Company's service
margins have been positively affected versus the prior year periods due
primarily to improved consulting margins. These margins have improved as a
result of higher utilization and billable rates in the consulting area and a
higher percentage of support revenues which have higher margins than the
consulting and education revenues.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
second quarters of fiscal 1996 and 1995 would have been 11% and 10%,
respectively, of revenues without the capitalization of software development
costs in accordance with Statement of Financial Accounting Standards No. 86.
Before considering the impact of software capitalization, research and
development expenses increased 54% from the second quarter of fiscal 1995 and
51% from the first half of fiscal 1995 to the corresponding periods of fiscal
1996 (63% and 58% after the adjustment for software capitalization). A portion
of this increase was due to research and development staff hired in connection
with the acquisition of the Rdb and repository businesses

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of Digital Equipment Corporation and the on-line analytical processing business
of Information Resources, Inc. The Company capitalized approximately $12,764,000
and $11,770,000 during the second quarters of fiscal 1996 and 1995,
respectively, and $25,350,000 and $22,586,000 in the corresponding six month
periods. Amortization of capitalized software development costs is charged to
sales and marketing expenses and totaled $12,975,000 and $11,823,000 in the
second quarters of fiscal 1996 and 1995, respectively, and $25,907,000 and
$22,698,000 in the corresponding six month periods. The Company expects the
amount of amortization of capitalized software development costs to continue to
increase in fiscal 1996 over fiscal 1995, as a result of the introduction of new
products and the commencement of the related amortization. The Company believes
that research and development expenditures are essential to maintaining its
competitive position and expects these costs to continue to constitute a
significant percentage of revenues.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as a
percentage of revenues decreased in the second quarter and first half of fiscal
1996 as compared to the corresponding periods in fiscal 1995, primarily because
of higher revenue levels.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Based on the results of a
third-party appraisal, the Company recorded a special charge of $50,931,000 in
the first quarter of fiscal 1996 to expense in-process research and development
costs related to the acquisition of the on-line analytical processing business
of Information Resources, Inc.

OTHER INCOME (EXPENSE):

Changes in non-operating expenses primarily reflect fluctuations in interest
income and expense related to changes in cash and debt balances and interest
rates. They also reflect foreign exchange and other miscellaneous income and
expense items. Additionally, the Company realized a gain of approximately $3.1
million and $1.8 million during the first three months of fiscal 1996 and 1995,
respectively, related to the sale of certain securities.

PROVISION FOR INCOME TAXES:

The Company's estimated effective tax rate for the first half of fiscal 1996 was
34% as compared to a 33% tax rate in the corresponding period of fiscal 1995.

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NET INCOME AND EARNINGS PER SHARE:

LIQUIDITY AND CAPITAL RESOURCES:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
NOV 30, NOV 30,
1995 CHANGE 1994
-------- ------ --------
<S> <C> <C> <C>
Working capital................................... $634,990 102% $314,865
Cash and cash investments......................... $562,088 71% $329,447
Cash provided by operating activities............. $242,797 46% $166,452
Cash used for investing activities................ $231,806 (24%) $306,228
Cash provided by (used for) financing
activities...................................... $ 11,007 123% $(48,725)
</TABLE>

Working capital increased in the first half of fiscal 1996 over the
corresponding prior year period, due primarily to increased cash flow from
operations, which resulted in higher cash levels.

The Company generated higher positive cash flows from operations in the first
half of fiscal 1996 over fiscal 1995, due primarily to improved profitability.

Cash used for investing activities decreased in the first half of fiscal 1996 as
compared to the corresponding period of the prior year, due primarily to changes
in the levels of cash investments. In both periods, the Company made significant
investments in capital expenditures and acquired the Rdb database and repository
businesses of Digital Equipment Corporation and the on-line processing business
of Information Resources, Inc.

The Company's Board of Directors has approved the repurchase of up to 18 million
shares of Common Stock on the open market to reduce the dilutive effect of the
Company's stock plans. Pursuant to this repurchase program, the Company
repurchased 1,457,500 shares of the Company's Common Stock for approximately
$48,580,000 during the first half of fiscal 1996. To date, the Company has
repurchased a total of 13,216,884 shares of the Company's Common Stock for
approximately $249,224,000. The Company has used cash flow from operations to
repurchase the Company's Common Stock, and to invest in working capital and
other assets to support its growth.

In December 1991, the Company entered into an $80 million subordinated debt
agreement with Nippon Steel Corporation ("NSC"). In connection with this
agreement, the Company also entered into a strategic relationship with NSC to
target major customers and industries in Japan. The subordinated debt agreement
has a maturity date of December 9, 1998, though the Company expects to prepay
the note in early calendar 1996. Interest is charged at LIBOR plus
three-quarters of one percent, payable semi-annually in arrears. The Company is
required to maintain certain financial covenants under the agreement. NSC has
committed to purchase from the Company an ownership position of up to
twenty-five percent of Oracle Corporation Japan, an indirect wholly owned
subsidiary of the Company, if shares in Oracle Corporation Japan are sold to the
public as a part of an initial public offering. The per share price of the stock
would be the same as that offered in the initial public offering. NSC has agreed
not to acquire shares of Oracle Corporation Japan beyond the twenty-five percent
interest and has agreed not to acquire any shares of the Company, subject to
certain exceptions.

At November 30, 1995, the Company also had outstanding debt of approximately
$11,138,000 (in addition to the NSC subordinated debt) primarily in the form of
other notes payable and capital leases.

The Company anticipates that current cash balances and anticipated cash flows
from operations will be sufficient to meet its working capital and capital
expenditure needs at least through the next twelve months.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A shareholder derivative lawsuit was filed in the Superior Court of the State of
California, County of San Mateo on October 23, 1995. The derivative suit has
been brought by Company shareholders, allegedly on behalf of the Company,
against certain of the Company's present and former officers and directors. The
derivative plaintiffs allege primarily that certain officers and directors
intentionally or negligently breached their fiduciary duties to the Company by
allegedly engaging in or acquiescing in certain activities related to nCUBE, a
company in which Oracle's chief executive officer owns a controlling interest.
The derivative plaintiffs seek compensatory and other damages, disgorgement of
profits and certain assets, temporary and permanent injunctions requiring the
defendants to relinquish their directorships, and a voiding of all contracts
with nCUBE. The Company on December 19, 1995 filed a demurrer, seeking dismissal
of the lawsuit.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On October 9, 1995, the Company held its Annual Meeting of Stockholders. At the
meeting, the stockholders elected as directors Lawrence J. Ellison (with
357,193,641 affirmative votes, and 2,350,823 votes withheld), Raymond J. Lane
(with 357,194,470 affirmative votes, and 2,349,994 votes withheld), Jeffrey O.
Henley (with 357,194,428 affirmative votes, and 2,350,036 votes withheld), James
A. Abrahamson (with 357,070,678 affirmative votes, and 2,473,786 votes
withheld), Michael J. Boskin (with 357,199,035 affirmative votes, and 2,345,429
votes withheld), Jack Kemp (with 357,046,632 affirmative votes, and 2,497,832
votes withheld), Donald L. Lucas (with 357,197,493 affirmative votes and
2,346,971 votes withheld) and Delbert W. Yocam (with 357,197,643 affirmative
votes, and 2,346,821 votes withheld).

In addition, the stockholders approved the adoption of the Company's Executive
Officers 1996 Bonus Plan (with 340,723,624 affirmative votes, 11,758,329
negative votes, 843,179 votes withheld and 6,219,332 broker non-votes).

The stockholders also approved an amendment to the Company's 1991 Long-Term
Equity Incentive Plan increasing the number of shares of the Company's common
stock reserved thereunder by 12,000,000 shares (with 260,494,243 affirmative
votes, 92,058,830 negative votes, 772,009 votes withheld and 6,219,382 broker
non-votes).

The stockholders also approved an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of the Company's common
stock by 200,000,000 shares (with 347,467,307 affirmative votes, 7,558,566
negative votes, 630,712 votes withheld and 3,887,879 broker non-votes).

The stockholders also ratified the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 1996 (with 359,007,542
affirmative votes, 159,377 negative votes and 377,545 votes withheld).

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

27.1 Financial Data Schedule

(b) Reports on Form 8-K

None

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<PAGE> 12

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Oracle
Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ORACLE CORPORATION

Dated: December 26, 1995 By: /s/ JEFFREY O. HENLEY
------------------------------------
Jeffrey O. Henley,
Executive Vice President and Chief
Financial Officer

Dated: December 26, 1995 By: /s/ THOMAS A. WILLIAMS
------------------------------------
Thomas A. Williams,
Vice President and Corporate
Controller

12
<PAGE> 13

ORACLE CORPORATION
INDEX OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT # EXHIBIT TITLES PAGE
- ---------- ------------------------------------------------------ ----
<S> <C> <C>
27.1 Financial Data Schedule 14
</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<EXCHANGE-RATE> 1
<CASH> 497,726
<SECURITIES> 56,736
<RECEIVABLES> 833,802
<ALLOWANCES> 66,884
<INVENTORY> 9,129
<CURRENT-ASSETS> 1,591,411
<PP&E> 980,912
<DEPRECIATION> 377,919
<TOTAL-ASSETS> 2,530,293
<CURRENT-LIABILITIES> 956,421
<BONDS> 0
0
0
<COMMON> 4,332
<OTHER-SE> 1,457,364
<TOTAL-LIABILITY-AND-EQUITY> 2,530,293
<SALES> 0
<TOTAL-REVENUES> 967,184
<CGS> 0
<TOTAL-COSTS> 255,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,034
<INTEREST-EXPENSE> 1,675
<INCOME-PRETAX> 207,426
<INCOME-TAX> 70,525
<INCOME-CONTINUING> 136,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,901
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31

</TABLE>