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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED FEBRUARY 28, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
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 no.)
</TABLE>
500 Oracle Parkway
Redwood City, California 94065
(Address of principal executive offices, including zip code)
(650) 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 February 28,
1998: 973,462,159
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ORACLE CORPORATION
TABLE OF CONTENTS
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PAGE
----
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.................... 3
Condensed Consolidated Balance Sheets at February 28, 1998 and
May 31, 1997................................................... 3
Condensed Consolidated Statements of Operations for the three
months and nine months ended February 28, 1998 and 1997........ 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended February 28, 1998 and 1997........................ 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.............................................. 16
Item 2. Changes in Securities and Use of Proceeds...................... 17
Item 6. Exhibits and Reports on Form 8-K............................... 17
Signatures..................................................... 18
</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>
FEBRUARY 28, MAY 31,
1998 1997
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................. $ 977,496 $ 890,162
Short-term cash investments........................... 539,323 323,028
Trade receivables, net of allowance for doubtful
accounts of $170,174 and $127,840, respectively...... 1,322,781 1,540,470
Prepaid and refundable income taxes................... 261,042 274,366
Other current assets.................................. 233,607 243,070
---------- ----------
Total Current Assets............................... 3,334,249 3,271,096
---------- ----------
LONG-TERM CASH INVESTMENTS............................. 82,752 116,337
PROPERTY, net.......................................... 920,343 868,948
COMPUTER SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $46,440 and $36,303, respectively..... 98,817 98,981
OTHER ASSETS........................................... 313,595 268,953
---------- ----------
Total Assets....................................... $4,749,756 $4,624,315
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current maturities of long-term
debt................................................. $ 13,407 $ 3,361
Accounts payable...................................... 202,558 185,444
Income taxes.......................................... 89,935 203,646
Accrued compensation and related benefits............. 298,430 394,153
Customer advances and unearned revenues............... 663,818 602,862
Value added tax and sales tax payable................. 72,610 121,914
Other accrued liabilities............................. 462,682 410,759
---------- ----------
Total Current Liabilities.......................... 1,803,440 1,922,139
---------- ----------
LONG-TERM DEBT......................................... 304,500 300,836
OTHER LONG-TERM LIABILITIES............................ 56,438 24,226
DEFERRED INCOME TAXES.................................. 8,344 7,402
STOCKHOLDERS' EQUITY................................... 2,577,034 2,369,712
---------- ----------
Total Liabilities and Stockholders' Equity......... $4,749,756 $4,624,315
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
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ORACLE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28 FEBRUARY 28
--------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Licenses and other................ $ 774,521 $ 681,108 $1,950,529 $1,767,093
Services.......................... 974,236 691,504 2,780,784 1,969,212
---------- ---------- ---------- ----------
Total Revenues................. 1,748,757 1,372,612 4,731,313 3,736,305
---------- ---------- ---------- ----------
OPERATING EXPENSES
Sales and marketing............... 567,619 460,361 1,545,560 1,274,899
Cost of services.................. 586,398 401,441 1,603,196 1,115,031
Research and development.......... 184,106 138,527 526,990 391,036
General and administrative........ 92,361 75,356 249,258 215,349
Acquired in-process research and
development...................... -- 36,800 167,054 36,800
---------- ---------- ---------- ----------
Total Operating Expenses....... 1,430,484 1,112,485 4,092,058 3,033,115
---------- ---------- ---------- ----------
OPERATING INCOME................... 318,273 260,127 639,255 703,190
Other income (expense), net....... 12,615 4,330 68,837 17,935
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................. 330,888 264,457 708,092 721,125
Provision for income taxes........ 115,811 95,204 297,220 259,605
---------- ---------- ---------- ----------
NET INCOME......................... $ 215,077 $ 169,253 $ 410,872 $ 461,520
========== ========== ========== ==========
EARNINGS PER SHARE:
Basic............................. $ 0.22 $ 0.17 $ 0.42 $ 0.47
Diluted........................... $ 0.22 $ 0.17 $ 0.41 $ 0.46
SHARES OUTSTANDING:
Basic............................. 974,947 985,155 978,907 985,557
Diluted........................... 991,641 1,009,779 1,002,155 1,011,473
</TABLE>
See notes to condensed consolidated financial statements.
4
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ORACLE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28
------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $410,872 $461,520
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 240,635 192,427
Write-off of acquired in-process research and
development............................................. 167,054 36,800
Provision for doubtful accounts.......................... 63,686 49,371
Change in assets and liabilities:
Decrease (increase) in trade receivables................ 119,901 (86,999)
Decrease (increase) in prepaid and refundable income
taxes.................................................. 10,375 (46,677)
Decrease (increase) in other current assets............. 1,100 (29,050)
Increase (decrease) in accounts payable................. 20,897 (21,799)
Decrease in income taxes................................ (105,359) (112,704)
Increase in customer advances and unearned revenues..... 75,352 45,143
Increase (decrease) in other accrued liabilities........ (73,185) 11,148
Increase in other long-term liabilities................. 32,347 2,089
Increase in deferred income taxes....................... 15,262 1,887
-------- --------
Net cash provided by operating activities................. 978,937 503,156
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in cash investments............................. (182,698) (170,136)
Capital expenditures, net................................ (240,581) (240,398)
Capitalization of computer software development costs.... (29,863) (22,424)
Increase in other assets................................. (179,113) (68,824)
-------- --------
Net cash used for investing activities.................... (632,255) (501,782)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under notes payable and long-term debt.... 13,779 305,806
Proceeds from common stock issued........................ 121,209 76,739
Repurchase of common stock............................... (372,075) (347,255)
-------- --------
Net cash provided by (used for) financing activities...... (237,087) 35,290
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... (22,261) (16,240)
-------- --------
Net increase in cash and cash equivalents................. 87,334 20,424
CASH AND CASH EQUIVALENTS
Beginning of period....................................... 890,162 715,742
-------- --------
End of period............................................. $977,496 $736,166
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Common stock dividend.................................... $ 3,266 $ --
======== ========
</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 fiscal year ended May 31,
1997.
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 nine month period ended February 28, 1998. The results for the nine
month period ended February 28, 1998 are not necessarily indicative of the
results expected for the full fiscal year.
2. EARNINGS PER SHARE
On July 14, 1997, the Company effected a three-for-two stock split in the form
of a common stock dividend distributed August 15, 1997 to stockholders of
record as of August 1, 1997. All per share data and numbers of common shares,
where appropriate, have been retroactively adjusted to reflect the stock
split.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings per
Share," which was adopted by the Company in the third quarter of fiscal 1998.
SFAS No. 128 requires companies to compute earnings per share under two
different methods, basic and diluted earnings per share, and to disclose the
methodology used for the calculations.
Basic earnings per share is calculated using the weighted average number of
shares outstanding during the period. Diluted earnings per share is computed
on the basis of the weighted average number of common shares outstanding plus
the dilutive effect of outstanding stock options using the "treasury stock"
method. The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28 FEBRUARY 28
------------------ -------------------
1998 1997 1998 1997
-------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Income.............................. $215,077 $ 169,253 $ 410,872 $ 461,520
Weighted average shares outstanding..... 974,947 985,155 978,907 985,557
Dilutive effect of employee stock
options................................ 16,694 24,624 23,248 25,916
-------- --------- --------- ---------
Diluted Shares outstanding.............. 991,641 1,009,779 1,002,155 1,011,473
======== ========= ========= =========
Basic Earning Per Share................. $ 0.22 $ 0.17 $ 0.42 $ 0.47
Diluted Earnings Per Share.............. $ 0.22 $ 0.17 $ 0.41 $ 0.46
</TABLE>
In December 1997, the Company reduced the exercise price of approximately 20%
of the outstanding common stock options held by the Company's employees to the
fair market value per share as of the date of the reduction in price. The
Company repriced these employee stock options in an effort to retain employees
at a time when a significant percentage of employee stock options had exercise
prices that were above fair market value. The Company believes that stock
options are a valuable tool in compensating and retaining employees. Executive
officers and directors were excluded from this repricing.
6
<PAGE>
3. ACQUISITIONS
On August 29, 1997, the Company acquired the shares of Treasury Services
Corporation ("TSC") for approximately $110,262,000 in cash and the conversion
of outstanding TSC options to the Company's options. The Company received an
appraisal of certain intangible assets which indicated that $91,500,000 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 $91,500,000 in the accompanying condensed consolidated statements of
operations in the first quarter of fiscal 1998. The remaining intangible
assets are being amortized over a five year period.
On August 11, 1997, the Company completed the merger of its wholly owned
subsidiary, Network Computer, Inc. ("NCI") and Navio Communications, Inc.
("Navio"), a development stage company, in a stock for stock exchange valued
at approximately $77,000,000. The Company received an appraisal of certain
intangible assets which indicated that $75,554,000 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 $75,554,000 in the
accompanying condensed consolidated statements of operations in the first
quarter of fiscal 1998. The remaining intangible assets are being amortized
over a three year period. As a result of the merger, the Company's ownership
interest in NCI was reduced to approximately 66%. The minority interest's
share of the charge for the acquired in-process research and development,
$25,726,000, is reflected in other income in the accompanying condensed
consolidated statements of operations for the first nine months of fiscal
1998.
4. LITIGATION
Refer to Part II, Item 1 for a description of legal proceedings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains forward-
looking statements. The forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Factors That May Affect Future Results
and Market Price of Stock." Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's opinions only
as of the date hereof. The Company undertakes no obligation to revise or
publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in
other documents the Company files from time to time with the Securities and
Exchange Commission, including the Annual Report on Form 10-K for the fiscal
year ended May 31, 1997 and the Quarterly Reports on Form 10-Q filed by the
Company in fiscal 1998.
RESULTS OF OPERATIONS
Total revenues increased 27% in the third quarter and in the first nine months
of fiscal 1998 as compared to the corresponding periods in fiscal 1997.
International revenues were unfavorably affected in the third quarter and
first nine months of fiscal 1998 when compared to the corresponding periods of
the prior year as a result of the strengthening of the U. S. dollar against
certain major international currencies. Total revenues expressed in local
currency increased 33% in the third quarter and first nine months of fiscal
1998 as compared to the corresponding periods in fiscal 1997. Domestic
revenues increased 42% and 37% in the third quarter and first nine months of
fiscal 1998, respectively, while international revenues increased 15% and 19%
in the third quarter and first nine
7
<PAGE>
months of fiscal 1998, respectively, as compared to the corresponding periods
in fiscal 1997. International revenues expressed in local currency increased
in the third quarter and first nine months of fiscal 1998 by approximately 25%
and 29%, respectively, from the corresponding periods of fiscal 1997.
International revenues constituted approximately 50% and 55% of total revenues
in the third quarters of fiscal 1998 and 1997, respectively, and 52% and 56%
of total revenues in the first nine months of fiscal 1998 and 1997,
respectively. Management expects that the Company's international operations
will continue to provide a significant portion of total revenues. However,
international revenues and profits will be adversely affected if the U.S.
dollar strengthens against certain major international currencies.
REVENUES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
FEB. 28, FEB. 28, FEB. 28, FEB. 28,
1998 CHANGE 1997 1998 CHANGE 1997
---------- ------ ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Licenses and other...... $ 774,521 14% $ 681,108 $1,950,529 10% $1,767,093
Percentage of revenues.. 44.3% 49.6% 41.2% 47.3%
Services................ $ 974,236 41% $ 691,504 $2,780,784 41% $1,969,212
Percentage of revenues . 55.7% 50.4% 58.8% 52.7%
Total revenues........ $1,748,757 27% $1,372,612 $4,731,313 27% $3,736,305
</TABLE>
LICENSES AND OTHER REVENUES. License revenues represent fees earned for
granting customers licenses to use the Company's software products. Licenses
and other revenues also include revenues from the Company's systems
integration business, documentation revenues, and other miscellaneous
revenues, which constituted 3% and 2% of total license and other revenues
during the third quarters of fiscal 1998 and 1997, respectively, and 4% and 3%
in the first nine months of fiscal 1998 and 1997, respectively. Licenses and
other revenues grew 14% and 29% in the third quarters of fiscal 1998 and 1997,
respectively, and 10% and 26% in the first nine months of fiscal 1998 and
1997, respectively. The decrease in the license revenue growth rate during the
third quarter of fiscal 1998 was primarily due to lower revenue growth in Asia
Pacific as a result of the weakened economies in that region, and the
strengthening of the U.S. dollar against certain major international
currencies. The decrease in the license revenue growth rate during the first
six months of fiscal 1998 was due to these factors, as well as weaker domestic
sales due to slower database market growth and a significant reorganization of
the sales force which the Company believes adversely affected both the
database and applications license revenue growth rates.
SERVICE REVENUES. Support, consulting and education services revenues in the
third quarter and first nine months of fiscal 1998 each increased
significantly from the corresponding periods of fiscal 1997. The Company's
consulting revenues comprised the largest portion of services revenues during
the third quarter and first nine months of fiscal 1998. Consulting and
education services revenues grew 47% and 45% in the third quarter and first
nine months of fiscal 1998, respectively, when compared to the corresponding
periods in fiscal 1997. The Company continued to expand its services to assist
customers in the use and implementation of the Company's products. Support
revenues represented 46% of services revenues for the third quarter and first
nine months of fiscal 1998. Support revenues grew 35% and 37% in the third
quarter and first nine months of fiscal 1998, respectively, when compared to
the corresponding periods in fiscal 1997. This growth reflects the continued
increase in the installed base of the Company's products under support
contracts as well as an increase in the number of customers electing higher
support service offerings. The Company believes that support services
represent an extension of its license business in that a significant
percentage of these revenues relate to update rights for future releases of
the software under license.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-2, "Software Revenue
Recognition." SOP No. 97-2 is effective for the Company's fiscal year
beginning June 1, 1998, and provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions. SOP No.
97-2 supersedes SOP No. 91-1, "Software Revenue Recognition." Application of
SOP No. 97-2 is not anticipated to materially impact the Company's revenue.
8
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OPERATING EXPENSES:
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ----------------------------
FEB. 28, FEB. 28, FEB. 28, FEB. 28,
1998 CHANGE 1997 1998 CHANGE 1997
-------- ------ -------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing..... $567,619 23% $460,361 $1,545,560 21% $1,274,899
Percentage of revenues.. 32.5% 33.5% 32.7% 34.1%
Cost of services........ $586,398 46% $401,441 $1,603,196 44% $1,115,031
Percentage of revenues . 33.5% 29.2% 33.9% 29.8%
Research and
development (1)........ $184,106 33% $138,527 $ 526,990 35% $ 391,036
Percentage of revenues.. 10.5% 10.1% 11.1% 10.5%
General and
administrative......... $ 92,361 23% $ 75,356 $ 249,258 16% $ 215,349
Percentage of revenues . 5.3% 5.5% 5.3% 5.8%
Acquired in-process
research and
development............ $ -- * $ 36,800 $ 167,054 354% $ 36,800
Percentage of revenues . -- 2.7% 3.5% 1.0%
</TABLE>
--------
* Not meaningful
(1) Pursuant to Statement of Financial Accounting Standards No. 86, the
Company capitalized software development costs equal to 0.7% and 0.4%
of total revenues during the third quarters of fiscal 1998 and 1997,
respectively, and 0.6% in the first nine months of both fiscal 1998 and
1997.
International expenses were favorably affected in the third quarter and first
nine months of fiscal 1998 when compared to the corresponding periods in the
prior year due to the strengthening of the U.S. dollar against certain major
international currencies. The net impact on operating margins, however, was
negative, since the negative effect on revenues was greater than the positive
effect on expenses.
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 market its products
through indirect channels in order to increase market share. Sales and
marketing expenses increased 23% and 21% in the third quarter and first nine
months of fiscal 1998, respectively, as compared to 26% and 27% in the
corresponding periods of fiscal 1997. The decrease in sales and marketing
expense growth in the third quarter and first nine months of fiscal 1998 was
due primarily to controls over increases in headcount and headcount related
expenditures. Sales and marketing expenses as a percentage of license revenues
increased in both periods as a result of lower than anticipated license
revenues. 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
services revenues, cost of services was 60% and 58% of revenues in the third
quarters of fiscal 1998 and 1997, respectively, and 58% and 57% in the first
nine months of fiscal 1998 and 1997, respectively. Increases in cost of
services as a percentage of services revenues was due to the increase in
consulting and education services as a percentage of the total services
revenues. Consulting and education services typically have lower margins than
support.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
third quarters of both fiscal 1998 and 1997 would have been 11% of total
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 36% from the third quarter of fiscal 1997 and 35% from the
first nine months of fiscal 1997 (33% and 35% after the adjustment for
software capitalization). A portion of this increase was due to research and
development staff hired in connection with the acquisitions of Datalogix
International, Inc. ("Datalogix") and TSC, as well as the merger of NCI and
Navio. The Company capitalized approximately $12,526,000 and $5,533,000 during
the third quarters of fiscal 1998 and 1997,
9
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respectively, and $29,863,000 and $22,424,000 in the first nine months of
fiscal 1998 and 1997, respectively. Amortization of capitalized software
development costs is charged to sales and marketing expenses and totaled
$12,738,000 and $5,466,000 in the third quarters of fiscal 1998 and 1997,
respectively, and $30,027,000 and $22,605,000 in the corresponding nine month
periods. 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 third quarter and first nine months of
fiscal 1998 as compared to the corresponding periods in fiscal 1997, primarily
due to higher revenue levels and improved productivity.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Based on the results of third-
party appraisals, the Company recorded charges of $91,500,000 and $75,554,000
in the first quarter of fiscal 1998 and $36,800,000 in the third quarter of
fiscal 1997 to expense in-process research and development costs related to
the acquisition of TSC, the merger of NCI and Navio, and the acquisition of
Datalogix, respectively. 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.
OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ------------------------
FEB 28, FEB 28, FEB 28, FEB 28,
1998 CHANGE 1997 1998 CHANGE 1997
-------- ------ ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Other income (expense)........... $ 12,615 191% $ 4,330 $ 68,837 284% $ 17,935
Percentage of revenues .......... 0.7% 0.3% 1.5% 0.5%
</TABLE>
Other income and expense in the first nine months of fiscal 1998 includes the
minority interest's share of the one-time acquired research and development
charge for NCI. Excluding this credit of $25,726,000, other income and expense
for the first nine months of fiscal 1998 was $43,111,000, a 140% increase over
the corresponding prior year period. Changes in non-operating income and
expense primarily reflect fluctuations in interest income and expense related
to changes in cash and debt balances and interest rates, as well as foreign
exchange and other miscellaneous items. The Company also realized a gain of
approximately $4,300,000 during the first nine months of fiscal 1998 related
to the sale of certain securities.
PROVISION FOR INCOME TAXES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ------------------------
FEB 28, FEB 28, FEB 28, FEB 28,
1998 CHANGE 1997 1998 CHANGE 1997
-------- ------ ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Provision for income taxes....... $115,811 22% $95,204 $297,220 14% $259,605
Percentage of revenues .......... 6.6% 6.9% 6.3% 6.9%
</TABLE>
The effective tax rate in the first nine months of fiscal 1998 was negatively
affected due to the non-deductibility of the charges related to the acquired
in-process research and development. Excluding the effect of these charges of
$167,054,000, the effective tax rate for the first nine months of fiscal 1998
would have been 35% as compared to a 36% tax rate in the corresponding prior
year period.
10
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NET INCOME AND EARNINGS PER SHARE:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ----------------------------
FEB 28, FEB 28, FEB 28, FEB 28,
1998 CHANGE 1997 1998 CHANGE 1997
-------- ------ -------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net income.............. $215,077 27% $169,253 $ 410,872 (11%) $ 461,520
Percentage of revenues . 12.3% 12.3% 8.7% 12.4%
Earnings per share:
Basic................. $ 0.22 29% $ 0.17 $ 0.42 (11%) $ 0.47
Diluted............... $ 0.22 29% $ 0.17 $ 0.41 (11%) $ 0.46
</TABLE>
Excluding the financial statement effects of the acquisition of TSC and the
merger of NCI and Navio in fiscal 1998 and the acquisition of Datalogix in
fiscal 1997, net income and earnings per share in the first nine months of
fiscal 1998 and 1997 would have been $552,200,000 and $0.55, respectively, and
$485,072,000 and $0.48, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
FEB 28, FEB 28,
1998 CHANGE 1997
---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Working capital.. $1,530,809 24% $1,235,676
Cash and cash
investments..... $1,599,571 49% $1,073,431
Cash provided by
operating
activities...... $ 978,937 95% $ 503,156
Cash used for
investing
activities...... $ 632,255 26% $ 501,782
Cash provided by
(used for)
financing
activities...... $ (237,087) * $ 35,290
</TABLE>
--------
* Not meaningful
Working capital increased in the first nine months of fiscal 1998 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
nine months of fiscal 1998 over fiscal 1997, due primarily to higher cash
collections and improved profitability, excluding depreciation and
amortization and the charges for in-process research and development.
Cash used for investing activities increased in the first nine months of
fiscal 1998 as compared to the corresponding prior year period. Due primarily
to changes in the levels of cash investments and the acquisition of TSC. In
both periods, the Company made significant investments in capital
expenditures.
Since July 1992, the Company's Board of Directors has approved the repurchase
of up to 90,500,000 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 14,336,106 shares of the Company's Common
Stock for approximately $372,075,000 during the first nine months of fiscal
1998. As of February 28, 1998, the Company has repurchased a cumulative total
of 66,722,870 shares since the inception of the plan of the Company's Common
Stock for approximately $1,214,017,000. The Company used cash flow from
operations and proceeds from the issuance of Senior Notes in fiscal 1997 to
repurchase the Company's Common Stock, and to invest in working capital and
other assets to support its growth.
During the third quarter of fiscal 1998, the Company sold 17,901,000 put
options at an average exercise price of $19.18 and purchased 8,950,500 call
options at an average exercise price of $23.64 through private placements. The
Company sold two put options for each call option purchased and, as a result,
no cash was exchanged as part of these transactions. As of February 28, 1998,
the Company has a maximum potential obligation under the put options to buy
back 17,901,000 shares of its common stock at an average exercise price of
$19.18. These put options will expire between January and August of 1999. The
Company has the unconditional right to settle the put options by physical
settlement of the options or by net settlement using cash or stock.
11
<PAGE>
During the third quarter, in order to hedge the value of the Company's common
stock pledged as collateral for an obligation arising under an existing lease
facility, the Company entered into a contract (the "forward contract") to sell
6,000,000 shares of the Company's Common Stock on a forward basis at a price
of $26.50 per share (the closing market price on February 13, 1998) plus
accretion subject to upward adjustments over time. The forward contract has a
stated maturity of February 13, 2003. The buyer may complete the sale on
February 13, 2001 (or for a fifteen day period thereafter) or in certain other
circumstances, as defined by the forward contract.
During the third quarter of fiscal 1997, the Company issued $150,000,000 in
6.72% Senior Notes due in the year 2004 and $150,000,000 in 6.91% Senior Notes
due in the year 2007. The Senior Notes are unsecured general obligations of
the Company that rank on parity with all other unsecured and unsubordinated
indebtedness of the Company that may be outstanding. At February 28, 1998, the
Company also had other outstanding debt of approximately $17,907,000 primarily
in the form of other notes payable.
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.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK
The Company operates in a rapidly changing environment that involves numerous
risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks.
INDUSTRY GROWTH AND ECONOMIC CONDITIONS. The strength and profitability of the
Company's business depends on the overall demand for computer software and
services, particularly in the product segments in which the Company competes.
Because the Company's sales are primarily to major corporate, government,
education and other business customers, the Company's business also partly
depends on general economic and business conditions. The decline in license
revenue growth rates that the Company experienced in the first three quarters
of fiscal 1998 may indicate a slowdown in the growth rate for database
software products; if so, there can be no assurances that the market growth
rate for such products will increase or be sustainable in the near term or
that the Company's license revenue growth rates will return to previous
levels.
INTERNATIONAL SALES. A substantial portion of the Company's revenues is
derived from international sales and is therefore subject to the risks
attendant thereto, including the general economic conditions in each country,
the overlap of different tax structures, the difficulty of managing an
organization spread over various countries, changes in regulatory
requirements, compliance with a variety of foreign laws and regulations and
longer payment cycles in certain countries. The Company experienced a large
decline in revenue growth rates in Asia Pacific during the second and third
quarters of fiscal 1998 in part due to the economic difficulties that have
occurred throughout this region. There can be no assurances that these
economies will recover in the near term or that the Company's growth rates in
this geographic region will return to previous levels if the recovery occurs.
The Company also has experienced relatively slower growth rates in countries
within its Europe Middle East Africa (EMEA) division during the last several
years, primarily as a result of weaker economies relative to the rest of the
world, slower adoption of information technology, and senior management
changes in several major countries. There can be no assurances that the
Company will be able to successfully address each of these challenges in the
near term. Other risks associated with international operations include import
and export licensing requirements, trade restrictions and changes in tariff
rates.
A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar. Changes in the value of major foreign currencies
relative to the value of the U.S. dollar adversely affected revenues and
operating results in the first nine months of fiscal 1998, particularly in
Asia Pacific and EMEA, and will continue to do so if the U.S. dollar continues
to strengthen relative to local currencies.
12
<PAGE>
Foreign currency transaction gains and losses are primarily related to
sublicense fee agreements between the Company and selling distributors and
subsidiaries. These gains and losses are charged against earnings in the
period incurred. The Company has reduced its transaction and translation gains
and losses associated with converting foreign currencies into U.S. dollars by
using forward foreign exchange contracts to hedge transaction and translation
exposures in major currencies. The Company finds it impractical to hedge all
foreign currencies in which it conducts business. As a result, the Company
will continue to experience foreign currency gains and losses.
SALES FORCE RESTRUCTURING AND VERTICAL MARKETS. The Company historically has
relied heavily on its direct sales force. At the beginning of the current
fiscal year, the Company restructured its sales force to provide, among other
things, specialized expertise within certain vertical markets and general
business areas designated by customer size. Transition issues associated with
this restructuring probably have contributed to the decline in revenue growth
rates experienced by the Company in the first half of fiscal 1998. Management
has focused its attention on addressing these transition issues and believes
that it has resolved the primary issues relating to the transition. However,
there can be no assurances that transition issues associated with the
restructuring will not recur or that revenue growth rates will not be
adversely affected in future quarters.
MANAGEMENT OF GROWTH. The Company has a history of rapid growth. The Company's
future operating results will depend on management's ability to manage growth,
continuously hire and retain significant numbers of qualified employees,
accurately forecast revenues and control expenses. A decline in the growth
rate of revenues without a corresponding and timely slowdown in expense growth
could have a material adverse effect on the Company's business, results of
operations or financial condition.
COMPETITIVE ENVIRONMENT. The computer software industry is an intensely
competitive industry with several large vendors that develop and market
databases, applications, development tools or decision support products.
Certain of these vendors have significantly more financial and technical
resources than the Company. The introduction of new competitive products into
one or more of the Company's various markets could have a material adverse
effect on the Company's business, results of operations or financial
condition. In addition, new distribution methods (e.g. electronic channels)
and opportunities presented by the Internet have removed many of the barriers
to entry historically faced by small and start-up companies in the software
industry. The Company expects to face increasing competition in the various
markets in which it competes.
PRICING. Intense competition in the various markets in which the Company
competes may put pressure on the Company to reduce prices on certain products,
particularly in the database marketplace where certain vendors offer deep
discounts in an effort to recapture or gain market share. In addition, the
bundling of software products for promotional purposes or as a long-term
pricing strategy by certain of the Company's competitors could have the effect
over time of significantly reducing the prices that the Company can charge for
its products. Shifts toward the use of operating systems on which the Company
experiences relatively greater price competition could result in lower average
license prices, thereby reducing license revenues for the Company. Any such
price reductions and resulting lower license revenues could have a material
adverse effect on the Company's business, results of operations or financial
condition if the Company cannot offset these price reductions with a
corresponding increase in sales volumes.
NEW PRODUCTS. The markets for the Company's products are characterized by
rapid technological advances in hardware and software development, evolving
standards in computer hardware and software technology and frequent new
product introductions and enhancements. Product introductions and short
product life cycles necessitate high levels of expenditure for research and
development. To maintain its competitive position, the Company must enhance
and improve existing products and 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. For example, in order to remain competitive in the European
markets for applications products, the Company will be required to enhance
certain of its applications products to meet reporting requirements as defined
by the European Monetary Unit (EMU). The Company's inability to
13
<PAGE>
port to or run on new or increasingly popular operating systems, or the
Company's failure to successfully enhance and improve its products in a timely
manner, and position and/or price its products, could have a material adverse
effect on the Company's business, results of operations or financial
condition.
Significant undetected errors or delays in new products or new versions of a
product may affect market acceptance of the Company's products and could have
a material adverse effect on the Company's business, results of operations or
financial condition. If the Company were to experience delays in the
commercialization and introduction of new or enhanced products, if customers
were to experience significant problems with the implementation and
installation of products or if customers were dissatisfied with product
functionality or performance, this could have a material adverse effect on the
Company's business, results of operations or financial condition.
There can be no assurance that the Company's new products will achieve
significant market acceptance or will generate significant revenue. Additional
products that the Company plans to directly or indirectly market in the future
are in various stages of development. Some of these products, such as
applications server and network computing software, are in business areas that
are relatively new to the Company's product development and sales and product
marketing personnel. See "New Business Areas."
YEAR 2000. A significant amount of the demand the Company has experienced in
recent years for applications software may be generated by customers in the
process of replacing and upgrading applications in order to accommodate the
change in date to the year 2000. Once such customers have completed their
preparations, the software industry and the Company may experience a
significant deceleration from the strong annual growth rates recently
experienced in the applications software marketplace.
The Company has designed and tested the most current versions of its products
to be year 2000 compliant. Some of the Company's customers are running product
versions that are not year 2000 compliant. The Company has been encouraging
such customers to migrate to current product versions. It is possible that the
Company may experience increased expenses in addressing migration issues for
such customers. In addition, there can be no assurances that the Company's
current products do not contain undetected errors or defects associated with
year 2000 date functions that may result in material costs to the Company.
Some commentators have stated that a significant amount of litigation will
arise out of year 2000 compliance issues, and the Company is aware of at least
three such lawsuits against other software vendors. Because of the
unprecedented nature of such litigation, it is uncertain whether or to what
extent the Company may be affected by it.
Although the Company does not believe that it will incur any material costs or
experience material disruptions in its business associated with preparing its
internal systems for the year 2000, there can be no assurances that the
Company will not experience serious unanticipated negative consequences and/or
material costs caused by undetected errors or defects in the technology used
in its internal systems, which are composed predominantly of third party
software and hardware technology with embedded software, and the Company's own
software products.
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS. The Company's revenues in
general, and its license revenues in particular, are relatively difficult to
forecast and vary from quarter to quarter due to various factors, including
(i) the relatively long sales cycles for the Company's products, (ii) the size
and timing of individual license transactions, which tend to be initiated by
customers at the end of a fiscal quarter as a negotiating tactic, (iii) the
timing of the introduction of new products or product enhancements by the
Company or its competitors, (iv) the potential for delay or deferral of
customer implementations of the Company's software, (v) changes in customer
budgets and (vi) seasonality of technology purchases and other general
economic conditions. Accordingly, the Company's quarterly results are
difficult to predict until the end of the quarter, and delays in product
delivery or closing of sales near the end of a quarter can cause quarterly
revenues and net income to fall significantly short of anticipated levels.
14
<PAGE>
The Company's license revenues in any quarter are substantially dependent on
orders booked and shipped in that quarter. Because the Company's operating
expenses are based on anticipated revenue levels and because a high percentage
of the Company's expenses are relatively fixed, a delay in the recognition of
revenue from even a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
cause net income to fall significantly short of anticipated levels.
UNCERTAINTY OF EMERGING AREAS. The impact on the Company of emerging areas
such as the Internet, on-line services and electronic commerce is uncertain.
There can be no assurance that the Company will be able to provide a product
offering that will satisfy new customer demands in these areas. In addition,
standards for network protocols, as well as other industry adopted and de
facto standards for the Internet, are evolving rapidly. There can be no
assurance that standards chosen by the Company will position its products to
compete effectively for business opportunities as they arise on the Internet
and other emerging areas.
NEW BUSINESS AREAS. The Company has in recent years expanded its technology
into a number of new business areas to foster long-term growth, including
Internet/electronic commerce, interactive media and data warehousing. It also
has begun to promote the use of network computing. These areas are relatively
new to the Company's product development and sales and marketing personnel.
There is no assurance that the Company will compete effectively or will
generate significant revenues in these new areas. The success of network
computing and, in particular, the Company's current network computer software
products is difficult to predict because network computing represent a method
of computing that is new to the entire computer industry. The successful
introduction of network computing to the market will depend in large measure
on (i) the commitment by hardware and software vendors to manufacture, promote
and distribute network computers, (ii) the lower cost of ownership relative to
personal computers, and (iii) the ease of use and administration relative to
personal computers. There can be no assurances that sufficient numbers of
vendors will undertake this commitment, that the market will accept network
computing or that network computing will generate significant revenues to the
Company. See "New Products."
HIRING AND RETENTION OF EMPLOYEES. The Company's continued growth and success
depend to a significant extent on the continued service of its senior
management and other key employees and the hiring of new qualified employees.
Competition for highly-skilled business, product development, technical and
other personnel is intense. There can be no assurances that the Company will
be successful in continuously recruiting new personnel and in retaining
existing personnel. None of the Company's employees is subject to a long-term
employment or a non-competition agreement. The loss of one or more key
employees or the Company's inability to attract additional qualified employees
or retain other employees could have a material adverse effect on the
continued growth of the Company. In addition, the Company may experience
increased compensation costs in order to attract and retain skilled employees.
FUTURE ACQUISITIONS. As part of its business strategy, the Company has
completed the acquisitions of Navio Communications, Inc. and Treasury Services
Corporation in the first quarter of fiscal 1998, and expects to make
acquisitions of, or significant investments in, businesses that offer
complementary products, services and technologies. Any acquisitions or
investments will be accompanied by the risks commonly encountered in
acquisitions of businesses. Such risks include, among other things, the
difficulty of assimilating the operations and personnel of the acquired
businesses, the potential disruption of the Company's ongoing business, the
inability of management to maximize the financial and strategic position of
the Company, the maintenance of uniform standards, controls, procedures and
policies and the impairment of relationships with employees and clients as a
result of any integration of new management personnel. These factors could
have a material adverse effect on the Company's business, results of
operations or financial condition. Consideration paid for future acquisitions,
if any, could be in the form of cash, stock, rights to purchase stock or a
combination thereof. Dilution to existing stockholders and to earnings per
share may result to the extent that shares of stock or other rights to
purchase stock are issued in connection with any such future acquisitions.
RELATIVE PRODUCT PROFITABILITY. Certain of the Company's revenues are derived
from products which, as a percentage of revenues, currently require a higher
level of development, distribution and support expenditures
15
<PAGE>
compared to certain of its other core products. To the extent that revenues
generated from such products become a greater percentage of the Company's
total revenues, the Company's operating margins may be adversely affected,
unless the expenses associated with such products decline as a percentage of
revenues.
ENFORCEMENT OF THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS. Despite the
Company's efforts to protect its intellectual property rights, it may be
possible for unauthorized third parties to copy certain portions of the
Company's products or to reverse engineer or obtain and use technology or
other information that the Company regards as proprietary. In addition, the
laws of certain countries do not protect the Company's proprietary rights to
the same extent as do the laws of the United States. Accordingly, there can be
no assurance that the Company will be able to protect its proprietary
technology against unauthorized third party copying or use, which could
adversely affect the Company's competitive position.
The Company from time to time receives notices from third parties claiming
infringement by the Company's products of third party patent and other
intellectual property rights. The Company expects that software products will
increasingly be subject to such claims as the number of products and
competitors in the Company's industry segments grows and the functionality of
products overlaps. Regardless of its merit, responding to any such claim could
be time-consuming, result in costly litigation and require the Company to
enter into royalty and licensing agreements which may not be offered or
available on terms acceptable to the Company. If a successful claim is made
against the Company and the Company fails to develop or license a substitute
technology, the Company's business, results of operations or financial
condition could be materially adversely affected.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's Common
Stock has experienced significant fluctuations and may continue to fluctuate
significantly. The market price of the Common Stock may be significantly
affected by factors such as the announcement of new products or product
enhancements by the Company or its competitors, technological innovation by
the Company or its competitors, quarterly variations in the Company's or its
competitors' results of operations, changes in prices of the Company's or its
competitors' products and services, changes in revenue and revenue growth
rates for the Company as a whole or for specific geographic areas, business
units, products or product categories, changes in earnings estimates by market
analysts, speculation in the press or analyst community and general market
conditions or market conditions specific to particular industries. The stock
prices for many companies in the technology sector have experienced wide
fluctuations which often have been unrelated to their operating performance.
Such fluctuations may adversely affect the market price of the Company's
Common Stock.
LONG-TERM INVESTMENT CYCLE. Developing and localizing software is expensive
and the investment in product development often involves a long payback cycle.
The Company's plans for its fiscal year ending May 31, 1998 include
significant investments in software research and development and related
product opportunities from which significant revenues are not anticipated for
several years.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Shareholder class actions were filed in California Superior Court for the
County of San Mateo against the Company and its chief financial officer and
chief operating officer during the third quarter of fiscal 1998. The class
actions have been brought on behalf of purchasers of the stock of the Company
during the period April 29, 1997 through December 11, 1997. The complaints
allege violations of California state securities laws. Specifically, the
complaints allege that the Company made misstatements about anticipated
revenue growth in the Company's database and applications businesses. The
complaints further allege that certain officers and directors sold stock in
the Company while making the allegedly false and misleading statements. The
Company is in the process of obtaining consolidation of the actions and has
filed a demurrer, asking the Court to dismiss the complaints. The Company's
demurrer is being scheduled for hearing in May 1998. The Company believes that
it has meritorious defenses to these actions and intends to vigorously defend
them.
16
<PAGE>
The Company is subject to various other legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, management
does not believe that the outcome of any of these legal matters will have a
material adverse effect on the Company's consolidated results of operations or
consolidated financial position.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the third quarter of fiscal 1998, the Company sold 17,901,000 put
options at an average exercise price of $19.18 and purchased 8,950,500 call
options at an average exercise price of $23.64 through private placements,
relying upon Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"). The Company sold two put options for each call option
purchased and, as a result, no cash was exchanged as part of these
transactions. As of February 28, 1998, the Company has a maximum potential
obligation under the put options to buy back 17,901,000 shares of its common
stock at an average exercise price of $19.18. These put options will expire
between January and August of 1999. The Company has the unconditional right to
settle the put options by physical settlement of the options or by net
settlement using cash or stock.
On February 13, 1998, in order to hedge the value of the Company's common
stock pledged as collateral for an obligation arising out of an existing lease
facility, the Company entered into a contract (the "forward contract") to sell
to Union Bank of Switzerland, London Branch ("UBS"), in a private placement
relying upon Section 4(2)of the Securities Act, 6,000,000 shares of the
Company's Common Stock on a deferred delivery or forward basis at a price of
$26.50 per share (the closing market price on February 13, 1998) plus
accretion subject to upward adjustments over time. The forward contract has a
stated maturity of February 13, 2003. UBS may settle the sale on February 13,
2001 (or for a fifteen day period thereafter) or prior to this date if certain
other circumstances transpire, as defined by the forward contract.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
17
<PAGE>
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
<TABLE>
<S> <C>
Dated: April 10, 1998 By: /s/ JEFFREY O. HENLEY
</TABLE>
-------------------------------------
Jeffrey O. Henley
Executive Vice President and Chief
Financial Officer
<TABLE>
<S> <C>
Dated: April 10, 1998 By: /s/ THOMAS A. WILLIAMS
</TABLE>
-------------------------------------
Thomas A. Williams
Vice President and Corporate Controller
18
<PAGE>
ORACLE CORPORATION
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
# EXHIBIT TITLES
------- --------------
<C> <S>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 977,496
<SECURITIES> 539,323
<RECEIVABLES> 1,492,955
<ALLOWANCES> 170,174
<INVENTORY> 9,164
<CURRENT-ASSETS> 3,334,249
<PP&E> 1,671,302
<DEPRECIATION> 750,959
<TOTAL-ASSETS> 4,749,756
<CURRENT-LIABILITIES> 1,803,440
<BONDS> 0
0
0
<COMMON> 9,643
<OTHER-SE> 2,567,392
<TOTAL-LIABILITY-AND-EQUITY> 4,749,756
<SALES> 0
<TOTAL-REVENUES> 1,748,757
<CGS> 0
<TOTAL-COSTS> 586,398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,160
<INTEREST-EXPENSE> 12,211
<INCOME-PRETAX> 330,888
<INCOME-TAX> 115,811
<INCOME-CONTINUING> 215,077
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,077
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
