INFORMIX CORP, 10-Q, 1999-08-16

INFORMIX CORP
10-Q, 1999-08-16
PREPACKAGED SOFTWARE

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q

(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1999.

--------- 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 0-15325

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

INFORMIX CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 94-3011736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4100 BOHANNON DRIVE, MENLO PARK, CA 94025
(Address of principal executive office) (zip code)

Registrant's telephone number, including area code: (650) 926-6300

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

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
----- -----

At July 31, 1999, 191,084,277 shares of the Registrant's Common Stock were
outstanding.

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<PAGE>

INFORMIX CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 1999
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements

Unaudited Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 1999 and 1998........... 3

Unaudited Condensed Consolidated Balance Sheets
as of June 30, 1999 and December 31, 1998.................................. 4

Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998............................ 5

Notes to Unaudited Condensed Consolidated Financial Statements.................. 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................ 13

Item 3. Quantitative and Qualitative Disclosures about Market Risk...................... 35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings............................................................... 37

Item 2. Changes in Securities and Use of Proceeds....................................... 37

Item 3. Defaults Upon Senior Securities................................................. 37

Item 4. Submission of Matters to a Vote of Security Holders............................. 37

Item 5. Other Information............................................................... 38

Item 6. Exhibits and Reports on Form 8-K................................................ 38

Signatures............................................................................... 39
</TABLE>

FORWARD LOOKING STATEMENTS

THIS QUARTERLY REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS DESCRIBED HEREIN AND IN OTHER DOCUMENTS. READERS SHOULD PAY
PARTICULAR ATTENTION TO THE SECTION OF THIS REPORT ENTITLED "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
FACTORS THAT MAY AFFECT FUTURE RESULTS" AND SHOULD ALSO CAREFULLY REVIEW THE
RISK FACTORS DESCRIBED IN THE OTHER DOCUMENTS THE COMPANY FILES FROM TIME TO
TIME WITH THE SECURITIES AND EXCHANGE COMMISSION.

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INFORMIX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES
Licenses ......................................... $ 102,269 $ 85,966 $ 200,176 $ 169,397
Services ......................................... 104,489 88,235 203,180 165,803
----------- ----------- ----------- -----------
206,758 174,201 403,356 335,200
COSTS AND EXPENSES
Cost of software distribution..................... 9,087 8,259 19,194 18,092
Cost of services.................................. 43,764 37,512 88,547 74,937
Sales and marketing............................... 75,504 65,564 151,922 128,917
Research and development.......................... 40,129 36,191 79,277 72,810
General and administrative........................ 19,762 16,753 37,704 29,904
Restructuring charges............................. -- (1,431) (578) (4,683)
----------- ------------ ------------ -----------
188,246 162,848 376,066 319,977
----------- ----------- ----------- -----------
Operating income..................................... 18,512 11,353 27,290 15,223

OTHER INCOME (EXPENSE)
Interest income................................... 2,503 1,833 5,298 3,871
Interest expense.................................. (1,020) (1,284) (2,184) (3,166)
Litigation settlement expense..................... (97,016) -- (97,016) --
Other, net........................................ 889 413 (642) 98
----------- ----------- ----------- -----------

INCOME (LOSS) BEFORE INCOME TAXES.................... (76,132) 12,315 (67,254) 16,026
Income taxes...................................... 3,133 -- 4,465 1,900
----------- ----------- ----------- -----------

NET INCOME (LOSS).................................... $ (79,265) $ 12,315 $ (71,719) $ 14,126
Preferred stock dividend.......................... (279) (624) (583) (1,227)
Value assigned to warrants........................ -- (388) -- (1,982)
------------ ------------ ----------- ------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS................................ $ (79,544) $ 11,303 $ (72,302) $ 10,917
============ =========== ============ ===========

NET INCOME (LOSS) PER COMMON SHARE
Basic................................................ $ (0.41) $ 0.07 $ (0.38) $ 0.07
============ =========== ============ ============
Diluted.............................................. $ (0.41) $ 0.07 $ (0.38) $ 0.06
============ =========== ============ ============

SHARES USED IN PER SHARE CALCULATIONS
Basic................................................ 193,349 167,787 191,122 164,000
=========== =========== =========== ===========
Diluted.............................................. 193,349 171,425 191,122 169,847
=========== =========== =========== ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.

<PAGE>

INFORMIX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. $ 125,595 $ 183,975
Short-term investments................................. 80,202 37,116
Accounts receivable, net............................... 186,567 187,240
Recoverable income taxes............................... 3,667 3,255
Other current assets................................... 32,042 20,308
----------- -----------
Total current assets...................................... 428,073 431,894

PROPERTY AND EQUIPMENT, net............................... 64,486 74,937
SOFTWARE COSTS, net....................................... 38,355 38,006
LONG-TERM INVESTMENTS..................................... 17,500 22,191
INTANGIBLE ASSETS, net.................................... 34,515 41,482
OTHER ASSETS.............................................. 4,478 6,795
----------- -----------
Total Assets ........................................... $ 587,407 $ 615,305
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable....................................... $ 25,986 $ 29,742
Accrued expenses....................................... 50,466 59,234
Accrued employee compensation.......................... 51,517 50,424
Deferred revenue....................................... 139,108 131,423
Advances from customers and financial institutions..... 75,145 121,077
Accrued restructuring costs............................ 2,510 5,813
Other current liabilities.............................. 3,419 6,552
----------- -----------
Total current liabilities................................. 348,151 404,265

OTHER NON-CURRENT LIABILITIES............................. 1,483 3,313

STOCKHOLDERS' EQUITY
Convertible preferred stock............................ -- --
Common stock; par value................................ 1,905 1,882
Shares to be issued for litigation settlement.......... 91,000 --
Additional paid-in capital............................. 439,183 429,621
Accumulated deficit.................................... (292,145) (220,426)
Accumulated other comprehensive loss................... (2,170) (3,350)
----------- -----------
Total stockholders' equity................................ 237,773 207,727
----------- -----------
Total Liabilities and Stockholders' Equity................ $ 587,407 $ 615,305
=========== ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.

<PAGE>

INFORMIX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................................ $ (71,719) $ 14,126
Adjustments to reconcile net income (loss) to net cash and cash equivalents
used in operating activities:
License fees received in advance................................................ (43,287) (30,553)
Depreciation and amortization................................................... 24,120 23,999
Amortization of capitalized software............................................ 9,746 10,463
Write-off of capitalized software............................................... -- 771
Provisions for losses on accounts receivable.................................... (218) (1,100)
Restructuring charges........................................................... (578) (4,683)
Shares to be issued for litigation settlement................................... 91,000 --
Other........................................................................... (776) 1,176
Changes in operating assets and liabilities:
Accounts receivable........................................................... 6,475 (3,462)
Other current assets.......................................................... (9,674) 5,620
Accounts payable, accrued expenses and other liabilities...................... (15,869) (53,269)
Deferred maintenance revenue.................................................. 3,397 14,745
----------- -----------
Net cash and cash equivalents used in operating activities.......................... (7,383) (22,167)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments of excess cash:
Purchases of available-for-sale securities.................................... (67,849) (23,308)
Maturities of available-for-sale securities................................... 9,102 5,117
Sales of available-for-sale securities........................................ 21,395 17,800
Proceeds from sale of strategic investments and marketable securities............ 1,832 1,500
Purchases of property and equipment.............................................. (10,994) (6,931)
Additions to software costs...................................................... (10,095) (8,708)
Other............................................................................ 375 388
----------- -----------
Net cash and cash equivalents used in investing activities.......................... (56,234) (14,142)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from customers.......................................................... 3,061 7,722
Proceeds from issuance of common stock, net...................................... 9,914 10,845
Proceeds from issuance of preferred stock, net................................... -- 14,100
Payments for structured settlements with resellers............................... (2,607) --
Principal payments on capital leases............................................. (3,184) (2,374)
------------ ------------
Net cash and cash equivalents provided by financing activities...................... 7,184 30,293
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS.............................................................. (1,947) 10,198
------------ -----------
Increase (decrease) in cash and cash equivalents.................................... (58,380) 4,182
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................... 183,975 139,396
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................................... $ 125,595 $ 143,578
=========== ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.

<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements
have been prepared on the same basis as the audited financial statements. In the
opinion of management, all significant adjustments which are normal, recurring
in nature and necessary for a fair presentation of the financial position and
results of the operations of the Company, have been consistently recorded. The
operating results for the interim periods presented are not necessarily
indicative of expected performance for the entire year. Certain previously
reported amounts have been reclassified to conform to the current presentation
format. The unaudited information should be read in conjunction with the audited
financial statements of the Company and the notes thereto for the year ended
December 31, 1998 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.

NOTE B - NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net
income (loss) per common share (in thousands, except per share data):

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss)................................. $ (79,265) $ 12,315 $ (71,719) $ 14,126
Preferred stock dividend.......................... (279) (624) (583) (1,227)
Value assigned to warrants........................ -- (388) -- (1,982)
----------- ----------- ----------- -----------
$ (79,544) $ 11,303 $ (72,302) $ 10,917
============ =========== ============ ===========
Denominator:
Denominator for basic net income (loss)
per common share -
Weighted-average shares outstanding............. 189,789 167,787 189,332 164,000
Weighted-average shares to be issued for
litigation settlement......................... 3,560 -- 1,790 --
Effect of dilutive securities:
Employee stock options.......................... -- 3,413 -- 3,209
Common stock warrants........................... -- 225 -- 2,638
----------- ----------- ----------- -----------
Denominator for diluted net income (loss)
per common share -
Adjusted weighted-average shares
and assumed conversions....................... 193,349 171,425 191,122 169,847
=========== =========== =========== ===========

Basic net income (loss) per common share............... $ (0.41) $ 0.07 $ (0.38) $ 0.07
=========== =========== =========== ===========
Diluted net income (loss) per common share............. $ (0.41) $ 0.07 $ (0.38) $ 0.06
=========== =========== =========== ===========
</TABLE>

<PAGE>

The Company excluded potentially dilutive securities for each period
presented from its diluted EPS computation because either the exercise price of
the securities exceeded the average fair value of the Company's Common Stock or
the Company had net losses and, therefore, these securities were antidilutive.
A summary of the excluded potential dilutive securities and the related
exercise/conversion features as of June 30, 1999 follows (in thousands):

<TABLE>
<S> <C>
Potential dilutive securities:
Stock options................................................. 20,598
Common Stock Warrants (Series B Warrants)..................... 1,750

Series B Convertible Preferred Stock.......................... 21
</TABLE>

The stock options have per share exercise prices ranging from $0.20 to
$42.09 and are exercisable through June 2009.

The warrants to purchase shares of Common Stock of the Company (the
"Series B Warrants") were issued in connection with the conversion of certain
shares of the Company's Series B Preferred Stock into shares of Common Stock of
the Company. Upon conversion of the Series B Preferred Stock, the holders are
eligible to receive Series B Warrants to purchase that number of shares of the
Company's Common Stock equal to 20% of the shares of the Company's Common Stock
into which the Series B Preferred Stock is convertible, but not less than an
aggregate of 1,750,000, of which approximately 1,563,000 have been issued as of
June 30, 1999, at a per share exercise price of $7.84. The Series B Warrants are
exercisable through November 2002.

NOTE C - COMPREHENSIVE INCOME

The following table sets forth the calculation of comprehensive income
(loss) for the three-month and six-month periods ended June 30, 1999 and 1998
(in thousands):

The tax effect on components of other comprehensive income is not significant.

<PAGE>

NOTE D - STOCKHOLDERS' EQUITY

On January 4, 1999, a holder of the Company's Series B Preferred Stock
converted 500 shares of Series B Preferred Stock into 68,849 shares of the
Company's Common Stock. In connection with this conversion, the Company also
issued such Series B Preferred Stockholder a warrant to purchase up to 13,769
shares of Common Stock at a purchase price of $7.84 per share.

On June 22, 1999, holders of the Company's Series B Preferred Stock
converted 1,800 shares of Series B Preferred Stock into 274,180 shares of the
Company's Common Stock. In connection with this conversion, the Company also
issued such Series B Preferred Stockholders a warrant to purchase up to 54,835
shares of Common Stock at a purchase price of $7.84 per share.

<TABLE>
<S> <C>
Reconciliation of outstanding shares (in thousands):
Shares outstanding at December 31, 1998................................... 188,158
Shares issued upon exercises of stock options............................. 1,373
Shares sold and issued under the employee stock purchase plan............. 654
Shares issued upon conversion of Series B Preferred Stock................. 343
---------
Shares outstanding at June 30, 1999....................................... 190,528
=========
</TABLE>

In accordance with the memorandum of understanding regarding the
settlement of pending private securities and related litigation against us
(see Note G), the Company will contribute a minimum of 9 million shares of
the Company's Common Stock with a guaranteed value of $91 million for a
maximum term of one year from the date of final approval of the settlement by
the courts. The issuance of these shares is pending final court approval.

NOTE E - RESTRUCTURING CHARGES

In June and September of 1997, the Company approved plans to
restructure its operations in order to bring expenses in line with forecasted
revenues. In connection with these restructurings, the Company substantially
reduced its worldwide headcount and consolidated facilities and operations to
improve efficiency. The following analysis sets forth the significant components
of the restructuring reserve at June 30, 1999 (in millions):

<TABLE>
<CAPTION>
Severance & Facility
Benefits Charges Other Total
----------- --------- ------- -------
<S> <C> <C> <C> <C>
Accrual balances, December 31, 1998...... $ 0.1 $ 5.2 $ 0.5 $ 5.8

Cash payments............................ -- 1.1 -- 1.1
Non-cash costs........................... -- 1.0 0.6 1.6
Adjustments.............................. 0.1 0.6 (0.1) 0.6
------- ------- ------- -------

Accrual balances, June 30, 1999.......... $ -- $ 2.5 $ -- $ 2.5
======= ======= ======= =======
</TABLE>

In the first quarter of 1999, the Company recorded restructuring-related
adjustments to decrease restructuring expense by $578,000 primarily due to
adjusting the estimated severance and facility charges to actual costs incurred.
The Company has substantially completed actions associated with its
restructuring except for subleasing or settling its remaining long-term
operating leases related to vacated properties. The terms of such operating
leases expire at various dates through 2003.

<PAGE>

NOTE F - BUSINESS SEGMENTS

The Company currently has four reportable operating segments, North
America, Europe, Asia/Pacific and Latin America, which are organized, managed
and analyzed geographically and operate in one industry segment: the
development and marketing of information management software and related
services. The Company evaluates operating segment performance based primarily
on net revenues and certain operating expenses. The Company's products are
marketed internationally through the Company's subsidiaries and through
application resellers, OEMs and distributors. Financial information for the
Company's North America, Europe, Asia/Pacific and Latin America operating
segments is summarized below for the three-month and six-month periods ended
June 30, 1999 and 1998:

Three months ended North Asia Latin
June 30, America Europe Pacific America Eliminations Total
- ------------------------------- ----------- ----------- ----------- ----------- -------------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
1999:
Net revenues from
unaffiliated customers....... $ 105,110 $ 64,072 $ 22,310 $ 15,266 $ -- $ 206,758
Transfers between segments..... (5,494) 2,912 1,272 1,310 -- --
Total net revenues............. 99,616 66,984 23,582 16,576 -- 206,758
Operating income (loss)........ 293 16,611 301 1,276 31 18,512
Net income (loss).............. $ (95,313) $ 15,975 $ 381 $ (199) $ (109) $ (79,265)

1998:
Net revenues from
unaffiliated customers....... $ 79,975 $ 60,685 $ 19,870 $ 13,671 $ -- $ 174,201
Transfers between segments..... 455 (3,246) 1,350 1,441 -- --
Total net revenues............. 80,430 57,439 21,220 15,112 -- 174,201
Operating income (loss)........ (16,143) 24,125 (1,220) 4,562 29 11,353
Net income (loss).............. $ (12,457) $ 23,097 $ (1,488) $ 3,134 $ 29 $ 12,315

<CAPTION>
Six months ended North Asia Latin
June 30, America Europe Pacific America Eliminations Total
- ------------------------------- ----------- ----------- ----------- ----------- -------------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
1999:
Net revenues from
unaffiliated customers....... $ 208,366 $ 122,788 $ 43,876 $ 28,326 $ -- $ 403,356
Transfers between segments..... (10,820) 4,751 3,613 2,456 -- --
Total net revenues............. 197,546 127,539 47,489 30,782 -- 403,356
Operating income (loss)........ (6,043) 27,568 4,736 294 735 27,290
Net income (loss).............. $ (95,405) $ 24,991 $ 4,629 $ (4,517) $ (1,417) $ (71,719)

1998:
Net revenues from
unaffiliated customers....... $ 161,445 $ 112,557 $ 38,338 $ 22,860 $ -- $ 335,200
Transfers between segments..... (1,932) (3,051) 1,553 3,430 -- --
Total net revenues............. 159,513 109,506 39,891 26,290 -- 335,200
Operating income (loss)........ (23,059) 41,357 65 2,098 (5,238) 15,223
Net income (loss).............. $ (19,452) $ 39,277 $ (240) $ (221) $ (5,238) $ 14,126
</TABLE>

<PAGE>

NOTE G - LITIGATION

Commencing in April 1997, a series of class action lawsuits
purportedly by or on behalf of stockholders and a separate but related
stockholder action were filed in United States District Court for the
Northern District of California. These actions name as defendants the
Company, certain of its present and former officers and directors and in some
cases, its former independent auditors. The complaints allege various
violations of the federal securities laws and seek unspecified but
potentially significant damages. Similar actions were also filed in
California state court and in Newfoundland, Canada.

Stockholder derivative actions, purportedly on behalf of the Company
and naming virtually the same individual defendants and the Company's former
independent auditors, were also filed, commencing in August 1997, in
California state court. While these actions allege various violations of
state law, any monetary judgments in the derivative actions would accrue to
the benefit of the Company.

Pursuant to Delaware law and certain indemnification agreements
between the Company and each of its current and former officers and
directors, the Company is obligated to indemnify its current and former
officers and directors for certain liabilities arising from their employment
with or service to the Company. This includes the costs of defending against
the claims asserted in the above-referenced actions and any amounts paid in
settlement or other disposition of such actions on behalf of these
individuals. The Company's obligations do not permit or require it to provide
such indemnification to any such individual who is adjudicated to be liable
for fraudulent or criminal conduct. Although the Company has purchased
directors' and officers' liability insurance to reimburse it for the costs of
indemnification for its directors and officers, the coverage under its
policies is limited. Moreover, although directors' and officers' insurance
presumes that 100 percent of the costs incurred in defending claims asserted
jointly against the Company and its current and former directors and officers
are allocable to the individuals' defense, the Company does not have
insurance to cover the costs of its own defense or to cover any liability for
any claims asserted against it. The Company has not set aside any financial
reserves relating to any of the above-referenced actions.

On May 26, 1999, the Company entered into a memorandum of
understanding regarding the settlement of pending private securities and
related litigation against the Company. The settlement will resolve all
material litigation arising out of the restatement of the Company's financial
statements that was publicly announced in November, 1997. In accordance with
the terms of the memorandum of understanding, the Company paid approximately
$3.2 million in cash during the second quarter of 1999 and an additional
amount of approximately $13.8 million of insurance proceeds was contributed
directly by certain insurance carriers on behalf of certain of the Company's
current and former officers and directors. The Company will also contribute a
minimum of 9 million shares of the Company's common stock, which will have a
guaranteed value of approximately $91 million for a maximum term of one year
from the date of final approval of the settlement by the courts. The
Company's former independent accountants, Ernst & Young LLP, will pay $34
million in cash. The total amount of the settlement, which is pending final
court approval, will be $142 million.

In July 1997, the Securities and Exchange Commission issued a formal
order of investigation of the Company and certain unidentified individuals
associated with the Company with respect to non-specified accounting matters,
public disclosures and trading activity in the Company's securities. The
Company is cooperating with the investigation and is providing all
information subpoenaed by the Commission. The approval of the proposed
settlement of the pending lawsuits will not affect this investigation.

The Company also has been advised by the office of the United States
Attorney for the Northern District of California ("U.S. Attorney") that the
U.S. Attorney is conducting an investigation of the events leading to the
restatement of the Company's financial statements that was announced publicly
in November 1997 (the "restatement"). The Company will cooperate fully in
the investigation. The Company currently is negotiating the terms of a
cooperation agreement with the U.S. Attorney providing that, in return for
the Company's cooperation, the U.S. Attorney will not take any action against
the Company relating to the restatement.

From time to time, in the ordinary course of business, the Company is
involved in various legal proceedings and claims. The Company does not believe
that any of these proceedings and claims will have a material adverse effect on
the Company's business or financial position.

10
<PAGE>

NOTE H - BUSINESS COMBINATION

On December 31, 1998, the Company acquired Red Brick Systems, Inc.
("Red Brick"), a provider of scalable decision support solutions for data
warehousing, data marts, OLAP and data mining. The acquisition was accounted for
using the purchase method of accounting. Accrued merger and integration costs
recorded in connection with the acquisition of Red Brick included approximately
$1.6 million for severance and other acquisition-related costs, $4.7 million for
costs associated with the shutdown and consolidation of the Red Brick facilities
and $1.6 million for costs associated with settling acquired royalty commitments
for abandoned technology. As of June 30, 1999, $1.1 million had been paid for
severance and other acquisition-related costs and $1.0 million had been paid for
costs associated with the shutdown and consolidation of Red Brick facilities. No
costs had been paid related to settling acquired royalty commitments for
abandoned technology as of June 30, 1999. During the first quarter of 1999, the
accrual for estimated costs associated with the shutdown and consolidation of
the Red Brick facilities was reduced by $2.0 million, which resulted in a
corresponding $2.0 million decrease in goodwill. This adjustment was the result
of a decrease in the estimated costs associated with the former Red Brick
headquarters facility due to a change in the amount of sublease income to be
received for such facility. The Company expects to complete its termination of
employees and consolidation of facilities by the end of 1999.

The following unaudited pro forma financial information presents the
combined results of operations of Informix and Red Brick for the three-month and
six-month periods ended June 30, 1998 as if the acquisition had occurred as of
the beginning of 1998. This financial information gives effect to certain
adjustments, including amortization of goodwill. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the two companies constituted a single entity during such
periods.

<TABLE>
<CAPTION>
For the Period Ended
June 30,1998
-----------------------------------
Three Months Six Months
--------------- ---------------
<S> <C> <C>
Net revenues...................................................... $ 181,884 $ 352,309
Net income (loss) applicable to common stockholders............... 3,201 (3,153)
Net income (loss) per share....................................... 0.02 (0.02)
</TABLE>

NOTE I - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which establishes
guidelines for the accounting for the costs of all computer software developed
or obtained for internal use. SOP 98-1 is effective for fiscal years beginning
after December 15, 1998. SOP 98-1 did not have a significant impact on the
Company's results of operations for the six month period ended June 30, 1999.
The Company will continue to evaluate the future impact of SOP 98-1 on its
financial statements and related disclosures.

In June 1998, the Financial Accounting Standards Board issued Statement
No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities," which establishes standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS 133, as amended, is effective for fiscal years
beginning after June 15, 2000. Earlier application of SFAS

<PAGE>

133 is encouraged but should not be applied retroactively to financial
statements of prior periods. The Company is currently evaluating the
requirements and impact of SFAS 133.

In December 1998, the AICPA issued Statement of Position 98-9 (SOP
98-9), "Modification of SOP 97-2, Software Revenue Recognition with Respect to
Certain Transactions." This amendment clarifies the specification of what is
considered vendor specific objective evidence of fair value for the various
elements in a multiple element arrangement. SOP 98-9 is effective for all
transactions entered into by the Company in fiscal year 2000. The adoption of
this statement is not expected to have a material impact on the Company's
operating results, financial position or cash flows.

NOTE J - SUBSEQUENT EVENTS

Subsequent to June 30, 1999, a holder of the Company's Series B
Preferred Stock converted an additional 2,000 shares of Series B Preferred
Stock into 283,364 shares of the Company's Common Stock. In connection with
such conversions, the Company also issued this Series B Preferred Stockholder
warrants to purchase up to 56,672 shares of Common Stock at an exercise price
of $7.84 per share and paid cash dividends in the amount of $163,014 to this
stockholder.

<PAGE>

THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS
RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF INFORMIX,
WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "FACTORS THAT MAY
AFFECT FUTURE RESULTS," AND ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.

References to or comparisons between the same "period" in this Form
10-Q refer to the Company's quarterly and/or six-month periods of the relevant
fiscal year.

OVERVIEW

Informix Corporation is a leading supplier of information management
software and solutions to governments and enterprises worldwide. We design,
develop, manufacture, market and support

- Relational database management systems

- Connectivity interfaces and gateways

- Graphical and character-based application development tools
for building database applications that allow customers to
access, retrieve and manipulate business data

We also offer complete solutions, which include our database
management software, our own and third-party software, and our consulting
services, to help customers design and deploy data warehouses, Web-based
enterprise repositories and electronic commerce applications.

On December 31, 1998, we acquired Red Brick Systems, Inc. ("Red
Brick"), a provider of scaleable decision support solutions for data
warehousing, data marts, OLAP and data mining, in a transaction which has
been accounted for as a purchase. Of the total purchase price, $2.6 million
was allocated to in-process research and development expense and charged to
operations in the fourth quarter of 1998. The development efforts related to
the purchased in-process research and development projects have progressed as
anticipated. We released Informix Red Brick Warehouse version 5.1.7 and
Formation version 1.4 on schedule during May of 1999, and we anticipate that
we will release Formation version 1.5 before the end of 1999 as originally
estimated. We are not aware of any events which would significantly alter the
estimates used in the valuation of such component of the total purchase price.

On May 26, 1999, we entered into a memorandum of understanding
regarding the settlement of pending private securities and related litigation
against us. The settlement will resolve all material litigation arising out
of the restatement of our financial statements that was publicly announced in
November, 1997. In accordance with the terms of the memorandum of
understanding, we paid approximately $3.2 million in cash during the second
quarter of 1999 and an additional amount of approximately $13.8 million of
insurance proceeds was contributed directly by certain of our insurance
carriers on behalf of certain of our current and former officers and
directors. We will also contribute a minimum of 9 million shares of our
common stock, which will have a guaranteed value of $91 million for a maximum
term of one year from the date of final approval of the settlement by the
courts. Our former independent accountants, Ernst & Young LLP, will pay $34
million in cash. The total amount of the settlement, which is pending final
court approval, will be $142 million.

In our Form 10-K for the year ended December 31, 1997, we stated
that Ernst & Young LLP, our former independent auditors, had issued a letter
identifying certain material weaknesses in our internal accounting controls
for the year ended December 31, 1997. During fiscal year 1998, we devoted
substantial effort and expense to addressing those material weaknesses.

In connection with their audit of our consolidated financial
statements for the year ended December 31, 1998, KPMG LLP, our independent
auditors, notified us that they identified certain conditions which,
collectively, represented a continuing material weakness in our internal
accounting controls during the year ended December 31, 1998. The identified
conditions were: significant turnover and a lack of adequate resources in the
accounting and finance departments; a failure to have timely and complete
account analyses and reconciliations at the end of each financial reporting
period; the absence of a formal budgeting process; and a lack of up-to-date
formal written accounting policies and procedures. We have taken, and we
continue to take, actions to strengthen our internal accounting controls. We
have added a significant number of experienced accounting and finance
personnel; we have improved our account reconciliation and review processes;
we have created a 1999 revenue and operating expense budget by quarter that
was approved by our Board of Directors; and our internal audit department
engaged in a comprehensive review of our accounting policies and procedures,
as well as our compliance with our existing accounting policies and
procedures.

We have made significant progress toward addressing each of the
identified conditions. Our independent auditors have informed us that the
existence of the identified conditions did not affect their report on our
consolidated financial statements for the year ended December 31, 1998. In
addition, it is our conclusion that the existence of the identified
conditions for the year ended December 31, 1998 had no effect on our reported
financial results for the quarters ended March 31, 1999 and June 30, 1999.
Moreover, based on the existing personnel, policies and procedures, monthly
financial statement review, account reconciliations and general business
processes, including forecasting, it is our conclusion that during the
quarters ended March 31, 1999 and June 30, 1999, we maintained, and we
continue to maintain, effective internal control over financial reporting.

<PAGE>

RESULTS OF OPERATIONS

The following table and discussion compares the results of operations
for the three-month and six-month periods ended June 30, 1999 and 1998,
respectively.
<TABLE>
<CAPTION>
Percent of Net Revenues
------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES
Licenses ......................................... 49% 49% 50% 51%
Services ......................................... 51 51 50 49
---- ----- ---- ----
100 100 100 100
COSTS AND EXPENSES
Cost of software distribution..................... 4 5 5 5
Cost of services.................................. 21 22 22 22
Sales and marketing............................... 37 38 38 38
Research and development.......................... 19 21 20 22
General and administrative........................ 10 10 9 9
Restructuring charges............................. -- (1) -- (1)
---- ----- ---- ----
91 93 93 95
---- ----- ---- ----
Operating income..................................... 9 7 7 5

OTHER INCOME (EXPENSE)
Interest income................................... 1 1 1 1
Interest expense.................................. (1) (1) (1) (1)
Litigation settlement expense..................... (47) -- (24) --
Other, net........................................ 1 -- -- --
---- ----- ---- ----
INCOME (LOSS) BEFORE INCOME TAXES.................... (37) 7 (17) 5
Income taxes...................................... 1 -- 1 1
---- ----- ---- ----
NET INCOME (LOSS).................................... (38)% 7% (18)% 4%
==== ===== ==== ====
</TABLE>

Our operating results for the quarter and six-month period ended
June 30, 1999 improved over the same periods of the prior year. For the three
and six-month periods ended June 30, 1999 net revenue growth was 19% and 20%
while operating expenses increased by only 16% and 18%, respectively, when
compared to the same periods in 1998. As a percentage of net revenues, all
operating expense categories remained consistent for the three and six-month
periods ended June 30, 1999 when compared to the corresponding prior year
periods. Operating income for the second quarter and first half of 1999
increased 63% and 79%, respectively, over the corresponding periods in 1998.
Growth in revenues was realized in all regions during the first half of 1999
as total sales in North America, Asia/Pacific, Latin America, and Europe
increased by 24%, 19%, 17% and 16%, respectively, compared to the same period
in 1998.

REVENUES

We derive revenues from licensing software and providing
post-license technical product support and updates to customers and from
consulting and training services.

LICENSE REVENUES. License revenues may involve the shipment of product by us or
the granting of a license to a customer to manufacture products. Our products
are sold directly to end-user customers or through resellers, including

<PAGE>

OEMs, distributors and value added resellers (VAR's). License revenues for
the second quarter of 1999 increased 19% to $102.3 million from $86.0 million
for the second quarter of 1998. During the first half of 1999, license
revenues increased 18% to $200.2 million from $169.4 million for the same
period in 1998. Each of our regions reported increased license revenues for
the first half of 1999 when compared to the same period in 1998, as follows:

- North America license revenues increased to $89.5 million as
compared to $68.6 million, an increase of 31%
- Europe license revenues increased to $64.2 million as compared
to $57.3 million, an increase of 12%
- Asia Pacific license revenues increased to $30.2 million as
compared to $27.5 million, an increase of 10%
- Latin America license revenues increased to $16.3 million as
compared to $16.1 million, an increase of 2%

Revenues from the sale of Red Brick products partially contributed to
the increase in license revenues. In addition, the Asia/Pacific economy has
shown signs of recovery from the economic turmoil of the past year.

Our increased focus on reseller channels in 1996 resulted in a
significant build-up of licenses that had not been resold or utilized by the
resellers. Revenue from license agreements with resellers is recognized as
earned by us when the licenses are resold or utilized by the reseller and all
of our related obligations have been satisfied. Accordingly, amounts received
from customers and financial institutions in advance of revenue being
recognized are recorded as a liability in "advances from customers and
financial institutions" in our financial statements. Advances in the amount
of $75.1 million and $121.1 million had not been recognized as earned revenue
as of June 30, 1999 and December 31, 1998, respectively. During the first
half of 1999, we received $3.1 million in customer advances and recognized
revenue from resellers with previously recorded customer advances of $43.3
million. Included in the $43.3 million recognized were $33.5 million of
licenses which were resold or utilized by the reseller and $9.8 million
related to contractual reductions in customer advances. Contractual
reductions result from settlements between us and resellers in which the
customer advance contractually expires or a settlement is structured wherein
the rights to resell our products terminate without sell through or
deployment of the software.

As of June 30, 1999, we had reached structured settlements with four
resellers with remaining rights to resell a total of $21.1 million of our
products. In accordance with the settlements, the minimum future reduction in
customer advances totals $10.2 million and $10.9 million for the six months
ended December 31, 1999 and the year ended December 31, 2000, respectively.

Our license transactions can be relatively large in size and
difficult to forecast both in timing and dollar value. As a result, license
transactions have caused fluctuations in net revenues and net income (loss)
because of the relatively high gross margin on such revenues. As is common in
the industry, a disproportionate amount of our license revenue is derived
from transactions that close in the last weeks or days of a quarter. The
timing of closing large license agreements also increases the risk of
quarter-to-quarter fluctuations. We expect that these types of transactions
and the resulting fluctuations in revenue will continue.

SERVICE REVENUES. Service revenues are comprised of maintenance, consulting and
training revenues. Service revenues for the quarter ended June 30, 1999
increased $16.3 million, or 18%, to $104.5 million from $88.2 million for the
same period in 1998. During the first half of 1999, service revenues increased
$37.4 million, or 23%, to $203.2 million from $165.8 million for the same period
in 1998. Service revenues accounted for 51% of net revenues in the second
quarters of both 1999 and 1998, and accounted for 50% and 49% of net revenues in
the first half of 1999 and 1998, respectively.

Maintenance revenues increased 28% to $78.7 million for the second
quarter of 1999 and 31% to $151.7 million for the first half of 1999 when
compared to the same periods in 1998. These increases are attributable primarily
to higher initial-year maintenance fees and the renewal of maintenance contracts
in connection with our growing installed customer base. As our products continue
to grow in complexity, more support services are expected to be required. We
intend to satisfy this requirement through internal support, third-party
services and OEM support.

<PAGE>

Consulting and training revenues increased slightly to $51.5 million
for the six-month period ended June 30, 1999 from $50.3 million for the same
period in 1998.

COSTS AND EXPENSES

COST OF SOFTWARE DISTRIBUTION. Cost of software distribution consists
primarily of: (1) manufacturing and related costs such as media,
documentation, product assembly and purchasing costs, freight, customs and
third party royalties; and (2) amortization of previously capitalized
software development costs and any write-offs of previously capitalized
software. Cost of software distribution increased slightly to $19.2 million
for the first half of 1999 from $18.1 million for the same period in 1998. As
a percentage of license revenues, cost of software distribution decreased
slightly to 10% for the six month period ended June 30, 1999 from 11% for the
same period in 1998. This decrease as a percentage of license revenues was
primarily due to the write-off in the first quarter of 1998 of approximately
$0.8 million of previously capitalized software costs after it was determined
that the projected sales of certain tools products were not sufficient to
realize the capitalized product development costs. Amortization of
capitalized software remained relatively flat at $9.7 million, or 5% of
license revenues, for the first half of 1999 compared to $10.2 million, or 6%
of license revenues, for the same period in 1998.

COST OF SERVICES. Cost of services consists primarily of maintenance,
consulting and training expenses. Cost of services for the second quarter of
1999 and the six-month period ended June 30,1999 increased by 17% and 18%,
respectively, when compared to the same periods in 1998. These increases are
primarily due to an increase of approximately 12% in headcount, a portion of
which resulted from the addition of the Red Brick consulting team subsequent
to the completion of our acquisition of Red Brick in December 1998.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist primarily
of salaries, commissions, marketing programs and related overhead costs.
Sales and marketing expenses increased 15% and 18% in the second quarter and
the first half of 1999, respectively, when compared to the same periods in
1998. These increases are in line with the net revenue growth rates over the
corresponding periods as sales and marketing expenses have remained
consistent at 37% to 38% of net revenues for these periods. The increase in
absolute dollars was due primarily to increased commissions and selling
expenses, which resulted from the growth in net revenues. Also, during the
first half of 1999, we increased our marketing efforts in connection with the
introduction of several new products and our new corporate logo and identity.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses consist
primarily of salaries, project consulting and related overhead costs for
product development. Research and development expenses increased 11% to $40.1
million for the second quarter of 1999 and increased 9% to $79.3 million for
the first half of 1999 when compared to the same periods in 1998. These
increases in research and development expenses in absolute dollars when
compared to the corresponding periods in 1998 are attributable primarily to
amortization of intangible assets resulting from the Red Brick acquisition
and an increase in headcount of approximately 3%. As a percentage of net
revenues, research and development expenses decreased slightly to 19% and 20%
for the three and six-month periods ended June 30, 1999, respectively, which
we believe is consistent with our long-term objectives for research and
development spending.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of finance, legal, information systems, human resources,
bad debt expense and related overhead costs. As a percentage of net revenues,
general and administrative expenses remained consistent at 10% and 9% for the
three and six-month periods ended June 30, 1999, respectively, when compared
to the same periods in 1998.

RESTRUCTURING CHARGES. In June and September of 1997, we approved plans to
restructure our operations to bring expenses in line with forecasted revenues
and substantially reduced our worldwide headcount and modified operations to
improve efficiency.

<PAGE>

Accordingly, we recorded restructuring charges totaling $108.2 million for
1997. The significant components of these restructuring charges were
severance and benefits, write-off of assets, and facility charges.

During the first half of 1999 and 1998, adjustments of $0.6 million
and $4.7 million, respectively, were recorded to the results of operations.
These adjustments, which appear as a credit to restructuring charges in our
statement of operations, were due primarily to adjusting the estimated
severance and facility components of the 1997 restructuring charge to actual
costs incurred. We have substantially completed actions associated with our
restructuring except for subleasing or settling our remaining long-term
operating leases related to vacated properties. The terms of these operating
leases expire at various dates through 2003. Accrued restructuring costs
totaling $2.5 million remained as a liability in our financial statements as
of June 30, 1999, all of which related to facility charges.

OTHER INCOME (EXPENSE)

INTEREST INCOME. Interest income for the first half of 1999 increased to $5.3
million from $3.9 million for the same period in 1998 due to an increase in the
average interest-bearing cash and short-term investment balances in 1999
provided by tax refunds received in the quarter ended December 31, 1998 and
increased sales and operating income.

INTEREST EXPENSE. Interest expense decreased to $2.2 million for the six-month
period ended June 30, 1999 from $3.2 million for the same period in 1998 due
primarily to the amortization of interest charges incurred in connection with
financing of customer accounts receivable prior to 1998, in addition to a
decline in interest charges related to payments on capital leases.

LITIGATION SETTLEMENT EXPENSE. During the second quarter of 1999 we incurred a
one-time charge of $97.0 million in connection with our entering into a
memorandum of understanding regarding the proposed settlement of the pending
private securities and related litigation against us. The charge consists of
$3.2 million in cash, $91.0 million in common stock and approximately $2.8
million in legal fees required to obtain and complete the settlement. The charge
excludes approximately $13.8 million of insurance proceeds which, according to
the terms of the memorandum of understanding, were contributed directly by our
insurance carriers.

INCOME TAXES

During the first half of 1999 and 1998, income tax expense resulted
from taxable earnings and withholding taxes in certain foreign jurisdictions
where we have fully utilized our net operating loss carryforwards. No income tax
expense resulted in the three-month period ended June 30, 1998 due to a change
in our expected effective tax rate for the year ended December 31, 1998. The
change resulted from implementation of measures to utilize net operating loss
carryforwards in certain foreign jurisdictions and other measures to minimize
foreign tax expense.

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
As of or for the
Six Months Ended
June 30,
------------------------------
1999 1998
------------ ------------
(Dollars in Millions)
<S> <C> <C>
Cash, cash equivalents, and short-term investments................ $ 205.8 $ 160.0
Working capital (deficit)......................................... 79.9 (44.7)
Cash and cash equivalents used for operations..................... (7.4) (22.2)
Cash and cash equivalents used for investment activities.......... (56.2) (14.1)
Cash and cash equivalents provided by financing activities........ 7.2 30.3
</TABLE>

OPERATING CASH FLOWS. Cash and cash equivalents used for operations
totaled $7.4 million for the six-month period ended June 30, 1999 compared to
$22.2 million for the same period in 1998. This decrease in operating cash
outflows was due primarily to improved operating profitability in the first half
of 1999.

17
<PAGE>

INVESTING CASH FLOWS. Net cash and cash equivalents used for
investment activities increased by approximately $42.1 million for the first
half of 1999 when compared to the same period in 1998. This increase was due
primarily to a net increase of approximately $37.0 million in our investment
in available-for-sale securities of excess cash generated from operating
income during the first six months of 1999 when compared to the same period
in 1998. Other significant changes in investing activities during the first
six months of 1999 compared to the corresponding period in 1998 include an
increase in capital expenditures of $4.1 million and an increase in the
capitalization of software development costs of $1.4 million.

FINANCING CASH FLOWS. The decrease in cash and cash equivalents
provided by financing activities in the first half of 1999 when compared to
the same period in 1998 is due to net proceeds of $14.1 million received by
us in the first quarter of 1998 from the issuance of 60,000 additional shares
of our Series A-1 Preferred Stock at $250 per share. Net cash and cash
equivalents provided by financing activities during the six-month period
ended June 30, 1999 consisted primarily of proceeds from the sale of our
Common Stock through the exercise of stock options and purchases under our
Employee Stock Purchase Plan offset by principal payments on captial leases
and payments for structured settlements with resellers.

SUMMARY. We believe that our current cash, cash equivalents and
short-term investments balances and cash flows from operations will be
sufficient to meet our working capital requirements for at least the next 12
months.

RECENT DEVELOPMENTS

The appointment of Jean-Yves F. Dexmier to the post of President and
Chief Executive Officer was effective July 16, 1999. Robert J. Finocchio, Jr.,
who has served as our President and Chief Executive Officer since July 1997,
will continue as Chairman of the Board.

<PAGE>

YEAR 2000 COMPLIANCE

GENERAL

Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field. These date
code fields will need to accept four-digit entries to distinguish 21st
century dates from 20th century dates. As a result, in less than six months,
computer systems and/or software used by many companies may need to be
upgraded to comply with Year 2000 requirements. Significant uncertainty
exists in the software industry concerning the potential effects associated
with such compliance.

We are:

- Reviewing and updating the Year 2000 compliance status of the
software and systems used in our internal business processes

- Obtaining appropriate assurances of compliance from the
manufacturers of these products and agreements, as necessary, to
modify or replace all non-compliant products

We expect this work to be substantially complete by the Fall of 1999.

In addition, we are converting certain of our software and systems
to commercial products from third parties that are known to be Year 2000
compliant. This conversion has required, and will continue to require:

- The dedication of substantial time from our administrative and
management information personnel

- The assistance of consulting personnel from third party software
vendors

- The training of our personnel using such systems

Based on the information available to date, we believe that we will
be able to complete our Year 2000 compliance review and make necessary
modifications prior to the end of 1999. To the extent that we are relying on
the products of other vendors to resolve Year 2000 issues, there can be no
guarantee that we will not experience delays in implementing such products.
We could incur substantial costs and disruption of our business if key
systems, or a significant number of systems, were to fail as a result of Year
2000 problems or if we were to experience delays in implementing Year 2000
compliant software products.

STATE OF READINESS

Our Year 2000 project is divided into four major sections:

- Product Readiness

- Information Systems Operations & Applications Software (IS
Systems)

- Third-party Suppliers

- Global Business Processes (includes Facilities, Legal,
Manufacturing, Technical Support, Sales, Product Management and
Development, Marketing and Finance)

<PAGE>

There are five general phases of our Year 2000 Project applicable to
each of the four sections:

- Awareness Phase. Increasing employee awareness through various
forms of communication

- Mission Critical Inventory Phase. Taking an inventory of
mission critical items relevant to Year 2000 (including
computer hardware, software, telecommunications equipment,
embedded controllers within our facilities, and other
non-computer related equipment), assigning priorities to
identified items for assessment and possible renovation, and
assessing the status of Year 2000 compliance of items which we
have determined to be material to our business

- Repair or Replace Phase. Repairing or replacing material items
that are not Year 2000 compliant. Material items are those items
that we believe have a significant negative impact on customer
service, involve a risk to the safety of individuals, may cause
damage to property or the environment, or may significantly affect
revenue

- Update Testing Phase. Testing of updates given by third party
suppliers

- Business Contingency Phase. Designing and implementing contingency
plans for each internal organization and critical location during
the Year 2000 rollover period

We have completed the Awareness Phase and the Mission Critical Inventory
Phase for each of the four sections of the project. We made progress in
completing the Repair or Replace phase for each of the four sections in the
first half of 1999 as various departments performed tests or received
compliance information from third-party suppliers. We are performing most of
the testing ourselves under the Update Testing Phase, although we have
retained third-parties to test certain of our key applications. The level of
testing is limited by our technical ability to emulate our complex systems
and networks and cost/benefit considerations.

We are working on the Business Contingency phase for each of the
four sections. A working plan of the program should be available during the
third quarter of 1999.

PRODUCT READINESS. All of our currently supported products are Year 2000
compliant, meaning that the use or occurrence of dates on or after January 1,
2000 will not adversely affect the performance or functionality of our
products with respect to four-digit year dates or the ability of our products
to correctly create, store, process, and output information related to such
date data, including Leap Year calculations. However, Year 2000 compliance of
our products may be affected by other parts of the system in which they are
being used, as discussed below.

Our products often depend on data from other parts of the system in
which they are being used. Year 2000 compliance is not effective unless all
of the hardware, operating system, other software, and firmware being used
along with our products correctly interpret and/or translate date data into a
four-digit year date and properly exchange date data with our products.

We have tested our currently supported products under different Year
2000 test scenarios. Throughout the remainder of 1999 and beyond, we will
continue to improve our testing efforts with each new release of our software
products. From time to time, our Year 2000 Program Office updates the history
table of each product family when a Year 2000 or DBCENTURY-related product
deficiency is found and fixed in a certain interim or maintenance release. We
have made Year 2000 testing scenarios part of our standard test suite.

Our Year 2000 Program Office finished incorporating the Red Brick
product compliance information and plans into our Year 2000 Program Plan
during the first quarter of 1999.

<PAGE>

IS SYSTEMS.

- IS Operations Systems. Our IS operations systems consist of all
computer hardware, systems software and telecommunications. Our
current hardware inventory includes PC Desktops, PC Laptops,
UNIX servers, UNIX workstations, and NT workgroup servers. Our
current software inventory includes Windows 95 operating system
and MS Office products, Product Development environment tools
for UNIX, and various management systems. Our telecommunications
equipment includes both voice and data services, including PBX
systems, voicemail, ACD, video conferencing, local area networks,
wide area networks, and remote access equipment. We made
significant progress in remediating our mission critical IS
operations components by the end of June 1999, and plan to
complete remediation of all mission critical IS operations
components by the end of September 1999. Non-critical systems
are scheduled to be made Year 2000 compliant by November 1999.
Testing is ongoing as hardware or system software is renovated
or replaced, although, the level of testing is significantly
limited by our technical ability to emulate our complex systems
and networks and cost/benefit considerations. We began
contingency planning in December 1998 and expect to be completed
with such planning by the third quarter of 1999.

- IS Applications Systems. Our IS applications systems consist of
all enterprise-wide applications, either supplied by third-party
vendors or internally-developed. We completed our remediation
efforts of all mission critical IS applications by the end of
March 1999. We made significant progress by the end of June 1999
towards making all important IS applications systems Year 2000
compliant. We plan to repair or replace the remaining important
systems by the end of the third quarter of 1999. None of our
other information technology projects have been delayed due to
the implementation of the Year 2000 project. Contingency planning
for this section began in the third quarter of 1998, and we
expect it to be completed by the end of the third quarter of
1999.

THIRD-PARTY SUPPLIERS. We have identified and prioritized critical suppliers
and communicated with them about our plans and progress in addressing the
Year 2000 problem and how their individual compliance can impact our success.
We have completed detailed evaluations of most critical suppliers. These
evaluations will be followed by the development and implementation of
contingency plans where appropriate, which began, in certain departments, in
the fourth quarter of 1998, with a scheduled completion date of September
1999. Follow-up reviews with each of our critical suppliers are scheduled
through the remainder of 1999.

GLOBAL BUSINESS PROCESSES. We have completed the assessment of the hardware,
software and associated embedded computer chips that are used in the
operation of all of our critical facilities. All repair and testing of
embedded systems within our critical facilities is scheduled to be completed
by the end of the third quarter of 1999. We have also completed the
preparation in our key business areas, including Finance, Product Development
and Legal. Customer Services has completed their Support Plans for the Year
2000 Rollover Weekend, and has documented their offerings on the Informix
Year 2000 Web Site. We began contingency planning for these organizations and
their respective critical business processes in the first quarter of 1999,
and expect to be completed with such planning, testing and training by
November 1999.

COSTS

The total cost associated with required modifications to become Year
2000 compliant is not expected to be material to our financial position. The
estimated total cost of the Year 2000 project is approximately $4.5 million.
The total amount expended on the project through June 30, 1999 was
approximately $1.0 million. The estimated future cost of completing the Year
2000 project is estimated to be approximately $3.5 million. We estimate that
the remaining amount will be spent as follows:

- $1.5 million for capital expenditures to repair or replace
software and related hardware, including but not limited to
local area network upgrades, replacement of desktop hardware
and backup data servers as identified in our contingency plan.

- approximately $0.3 million for capital expenditures to repair or
replace non-IS equipment, including but not limited to
security systems and backup generator supplies.

- $1.7 million for non-capital expenses for Technical Support,
Product Development, Operations, IS Operations and
Applications, Facilities, and the Year 2000 Program Office,
including but not limited to our contingency planning efforts
and management of our Year 2000 Weekend Support Program
offerings.

<PAGE>

The Year 2000 Project is expected to significantly reduce our level
of uncertainty about the Year 2000 problem and, in particular, about the Year
2000 compliance and readiness of our material third-party suppliers. We
believe that the possibility of significant interruptions of normal
operations will be reduced with the implementation of new business systems
and completion of the project as scheduled.

EUROPEAN MONETARY CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the
European Economic Community entered into a three-year transition phase during
which a common currency, the "Euro," was introduced. Between January 1, 1999
and January 1, 2002, governments, companies and individuals may conduct
business in these countries in both the Euro and existing national
currencies. On January 1, 2002, the Euro will become the sole currency in
these countries.

During the transition phase, we will continue to evaluate the impact
of conversion to the Euro on our business. In particular, we are reviewing:

- Whether our internal software systems can process transactions
denominated either in current national currencies or in the
Euro, including converting currencies using computation methods
specified by the European Economic Community

- The cost to us if we must modify or replace any of our internal
software systems

- Whether we will have to change the terms of any financial
instruments in connection with our hedging activities

Based on current information and our initial evaluation, we do not
expect the cost of any necessary corrective action to have a material adverse
effect on our business. We have reviewed the effect of the conversion to the
Euro on the prices of our products in the affected countries. As a result, we
have made some adjustments to our prices to attempt to eliminate
differentials that were identified. However, we will continue to evaluate the
impact of these and other possible effects of the conversion to the Euro on
our business. We cannot guarantee that the costs associated with conversion
to the Euro or price adjustments will not in the future have a material
adverse effect on our business.

FACTORS THAT MAY AFFECT FUTURE RESULTS

WE ARE SUBJECT TO INTENSE COMPETITION AND THIS COMPETITION MAY ADVERSELY
AFFECT OUR BUSINESS

We may not be able to compete successfully against current and/or
future competitors and such inability would materially adversely affect our
business, quarterly and annual operating results and financial condition. The
market for our products is highly competitive, diverse and will be subject to
rapid change as the Internet is embraced by businesses around the world.
Moreover, we expect that the technology for database products generally, and,
in particular, the technology underlying database solutions and products for
the Internet and data warehousing products will continue to change rapidly.
New products are introduced frequently, and existing products are enhanced
continually. Competition may also result in changes in pricing policies by us
or our competitors which could materially adversely affect our business and
future quarterly and annual operating results. We currently face competition
from a number of sources, including several large vendors that develop and
market databases, applications, development tools, decision support products,
consulting services and/or complete database-driven solutions for the
Internet. Our principal competitors include Computer Associates, IBM,
Microsoft, NCR/Teradata, Oracle and Sybase. Additionally, as we expand our
business in the markets of data warehousing and web/e-commerce, we expect to
compete with a different group of companies, including small, highly focused
companies offering single products or services that we include as part of an
overall solution. A number of our competitors have significantly greater
financial, technical, marketing and other resources than we do. As a result,
they may be able to respond more quickly to new or emerging technologies,
evolving markets and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products than we
can.

<PAGE>

COMPETITION MAY AFFECT PRICING OF OUR PRODUCTS OR SERVICES WHICH COULD ADVERSELY
AFFECT OUR BUSINESS

Existing and future competition or changes in our product or service
pricing structure or product or service offerings could result in an
immediate reduction in the prices of our products or services. If significant
price reductions in our products or services were to occur and not be offset
by increases in sales volume, our business, results of operations and
financial condition would be adversely affected. If such downward pressure on
prices were to occur, our operating margins would be adversely affected.
Several of our competitors have announced the development of enhanced
versions of their principal database products that are intended to improve
the performance or expand the capabilities of their existing products. New or
enhanced products by existing competitors or new competitors could result in
greater price pressure on our products. In addition, the following factors
could affect the pricing of RDBMS products and related products:

- The industry movement to new operating systems, like Windows NT

- Access to RDBMS products through low-end desktop computers

- Access to data and database-driven solutions through the Internet

- The bundling of software products for promotional purposes or as a
long-term pricing strategy by certain of our competitors

- Our own practice of bundling our software products for enterprise
licenses or for promotional purposes with our partners

In particular, the pricing strategies of competitors in the industry
have historically been characterized by aggressive price discounting to
encourage volume purchasing by customers. We may not be able to compete
effectively against competitors who continue to aggressively discount the
price of their products.

OUR INDUSTRY CHANGES RAPIDLY DUE TO EVOLVING TECHNOLOGY STANDARDS AND FUTURE
SUCCESS WILL DEPEND ON OUR ABILITY TO ENHANCE CURRENT PRODUCTS AND DEVELOP NEW
PRODUCTS THROUGH INVESTMENT AND ACQUISITION

Our future success will depend on our ability to address the
increasingly sophisticated needs of our customers by supporting existing and
emerging hardware, software, database and networking platforms. We will have
to develop and introduce enhancements to our existing products and solutions
on a timely basis to keep pace with technological developments, evolving
industry standards and changing customer requirements. We expect that we will
have to respond quickly to:

- Rapid technological change

- Emerging new markets

- Changing customer needs

- Frequent new product introductions

- Evolving industry standards that may render existing products and
services obsolete

As a result, our position in existing, emerging or potential markets
could be eroded rapidly by product advances. The life cycles of our products
are difficult to estimate. Our growth and future financial performance will
depend on our ability to:

- Continue to enhance our existing products and solutions

<PAGE>

- Develop and introduce new products and solutions that keep pace
with technological advances on a timely and cost-effective basis

- Meet changing customer requirements

- Match or exceed the product deliveries of our competitors

Our product development efforts will continue to require substantial
investments. We may not have sufficient resources to make the necessary
investments or be able to attract and retain qualified software development
engineers. In addition, it is unlikely that we will be able to internally
develop new products or solutions quickly enough to respond to market forces.
As a result, we will have to acquire technology or access to products or
solutions through mergers and acquisitions, investment and partnering
arrangements. We may not have sufficient cash, access to funding, or
available equity to engage in such transactions. Moreover, we may not be able
to forge partnering arrangements or strategic alliances on satisfactory
terms, or at all, with companies of our choice. Our failure to introduce new
products and solutions for any of these reasons could materially adversely
affect our business, quarterly and annual operating results and financial
condition.

ANY ACQUISITION OR INVESTMENT THAT WE MAY MAKE WILL BE SUBJECT TO A NUMBER OF
FACTORS WHICH COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS; ANY INVESTMENT OR
ACQUISITION MAY DILUTE EXISTING STOCKHOLDERS

In the future we may acquire, or invest in, businesses that offer
products, services and technologies that we believe would help us expand or
enhance our products and services or help us expand our distribution channels.
If we were to make such an acquisition or investment, the risks described below
could materially adversely affect our business and future operating results. Any
future acquisition or investment would present risks commonly encountered in
acquisitions of or investments in businesses. The following are examples of such
risks:

- Difficulty in combining the technology, operations or work force
of the acquired business

- Disruption of our on-going businesses

- Difficulty in realizing the potential financial or strategic
benefits of the transaction

- Difficulty in maintaining uniform standards, controls, procedures
and policies

- Possible impairment of relationships with employees and customers
as a result of any integration of new businesses and management
personnel

The consideration for any future acquisition could be paid in cash,
shares of our Common Stock, or a combination of cash and our Common Stock. If
the consideration is paid in Common Stock, this would further dilute existing
stockholders. Any amortization of goodwill or other assets resulting from such
acquisition transaction could materially adversely affect our operating results
and financial condition.

SLOWER GROWTH IN THE RDBMS MARKET WOULD ADVERSELY AFFECT SALES OF OUR PRODUCTS

If RDBMS industry growth rates decline for any reason, the markets
for our products will be adversely affected, which would have a negative
impact on our business, results of operations, financial condition and cash
flows. Prior to fiscal 1997, the RDBMS industry grew significantly, due in
part to the continuing development of new technologies and products
responsive to customer requirements. In fiscal 1997 and 1998, however, growth
rates throughout the industry slowed. Recent instability in the Asian-Pacific
and Latin American economies and financial markets, which had previously been
cited as potentially strong sources of revenue growth for relational database
software companies, has introduced additional uncertainty concerning industry
growth rates in the future.

IF THE OBJECT-RELATIONAL DATABASE MANAGEMENT SYSTEMS ("ORDBMS") MARKET DOES
NOT EVOLVE AS WE ANTICIPATE, OUR BUSINESS WILL BE ADVERSELY AFFECTED

Delays in market acceptance of ORDBMS products offered by us could
adversely effect our results of operations and financial condition. In recent
years, the types and quantities of data required to be stored and managed has
grown increasingly complex and includes, in addition to conventional
character data, audio, video, text and three-dimensional graphics in a
high-performance scalable environment. During 1996, we invested substantial
resources in developing our ORDBMS product line. The market for ORDBMS
products is new and evolving, and its growth depends upon a growing need to
store and manage complex data and on broader market acceptance of our
products as a solution for this need. As a result, organizations may not
choose to make the transition from conventional RDBMS to ORDBMS.

IF THE INTERNET DOES NOT CONTINUE TO DEVELOP AS WE ANTICIPATE, OR IF OUR
PRODUCT OFFERINGS ARE NOT ACCEPTED IN THIS MARKET, OUR BUSINESS COULD BE
ADVERSELY AFFECTED

The Internet is a new and rapidly evolving market. We are unable to
predict whether and to what extent Internet computing and electronic commerce
will be embraced by consumers and traditional businesses. The success of the
Internet and electronic commerce will depend in large measure on:

INTERNET COMPUTING. The success of Internet computing and, in particular, our
current Internet computing software products is difficult to predict because
Internet computing is new to the entire computer industry. Our successful
introduction of database-driven products and solutions for the Internet
market will depend in large measure on:

- The commitment by hardware and software vendors to manufacture,
promote and distribute Internet access appliances

- The lower cost of ownership of Internet computing relative to
client/server architecture

- The ease of use and administration relative to client/server
architecture

<PAGE>

In addition, if a sufficient number of vendors do not undertake a
commitment to the market, the market may not accept Internet computing or
Internet computing may not generate significant revenues for our business. 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 us will position our products to
compete effectively for business opportunities as they arise on the Internet.

The widespread acceptance and adoption of the Internet by
traditional businesses for conducting business and exchanging information is
likely only if the Internet provides these businesses with greater
efficiencies and improvements. The failure of the Internet to continue to
develop as a commercial or business medium could materially adversely affect
our business.

Even if the Internet and electronic commerce are widely accepted and
adopted by consumers and businesses, our database products and database-driven
solutions for the Internet may not succeed. We recently announced our
intention to focus a substantial part of our product development and sales
efforts on developing and selling technology and services for the Internet
market. This market is new to our product development, marketing and sales
organizations. We may not be able to market and sell our products and
solutions in this market. In addition, our database products and
database-driven solutions for the Internet may not compete effectively with
our competitors' products and solutions. Further, we may not generate
significant revenue in this market. Any of these events could materially,
adversely affect our business, operating results and financial condition.

IF THE DATA WAREHOUSE MARKET DOES NOT CONTINUE TO GROW, OR IF OUR PRODUCT
OFFERINGS IN THIS MARKET ARE NOT ACCEPTED, OUR BUSINESS COULD BE ADVERSELY
AFFECTED

In 1998 we entered the data warehouse market, and our acquisition of
Red Brick in December 1998 significantly expanded our presence in the market.
We recently announced that in addition to focusing on products and solutions
for the Internet, we intend to expand our product development and sales
effort on providing business intelligence solutions driven by our data
warehouse technology.

Although demand for data warehouse software has grown in recent
years, the market is still emerging. Our future financial performance in this
area will depend to a large extent on:

- Continued growth in the number of organizations adopting data
warehouses

- Our success in developing partnering arrangements with developers
of software tools and applications for the data warehouse market

- Existing customers expanding their use of data warehouses

The data warehouse market, however, may not continue to grow, or may
not grow rapidly, and its customers may not expand their use of data
warehouses. In addition, we may not be able to market and sell our products
and solutions in this market or otherwise compete effectively and generate
significant revenue. Any of these events could materially, adversely affect
our business, operating results and financial condition.

THERE ARE MANY FACTORS, INCLUDING SOME BEYOND OUR CONTROL, THAT MAY CAUSE
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS

Our quarterly operating results have varied greatly in the past and
may vary greatly in the future depending upon a number of factors described
below and elsewhere in this "Factors that May Affect Future Results" section,
including many that are beyond our control. As a result, we believe that
quarter-to-quarter comparisons of our financial results are not necessarily
meaningful, and you should not rely on them as an indication of our future
performance. These factors include:

- Changes in demand for our products and services, including changes
in industry growth rates for our products and services

- The size, timing and contractual terms of large orders for our
software products

- The budgeting cycles of our customers and potential customers

- Any downturn in our customers' businesses, in the domestic economy
or in international economies where our customers do substantial
business

- Changes in our pricing policies resulting from competitive
pressures, such as aggressive price discounting by our competitors
or other factors

- Our ability to develop and introduce on a timely basis new or
enhanced versions of products and solutions

<PAGE>

- Changes in the mix of revenues attributable to domestic and
international sales

- Seasonal buying patterns which tend to peak in the fourth quarter

POTENTIAL CHANGES IN MIX OF LICENSE AND SERVICE REVENUE. Historically, a
majority of our revenue has been attributable to the licensing of our
software products. Over the past few years, however, the percentage of our
revenue derived from services has been increasing. For the six months ended
June 30, 1999, we derived revenue evenly from licensing of software products
and sales of services. A significant change in the mix of software products
and services sold by us, including the mix between higher margin software
products and lower margin maintenance, consulting and training, could
materially adversely affect our operating results for future quarters.

ANY CANCELLATIONS OR DELAYS IN PLANNED CUSTOMER PURCHASES OF OUR PRODUCTS
COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS AND QUARTERLY OPERATING RESULTS

CANCELLATIONS OR DELAYS OF PLANNED PURCHASES. Because we do not know when, or
if, our potential customers will place orders and finalize contracts, we
cannot accurately predict our revenue and operating results for future
quarters. If there is a downturn in potential customers' businesses, the
domestic economy in general, or in international economies where we derive
substantial revenue, potential customers may defer or cancel planned
purchases of our products, which could materially adversely affect our
business, operating results and financial condition. Because our operating
expenses are based on anticipated revenue levels and because a high
percentage of our expenses are relatively fixed, delays in the recognition of
revenues from even a limited number of license transactions could cause
significant variations in operating results from quarter to quarter, which
could cause net income to fall significantly short of anticipated levels.

EFFECTS OF HISTORICAL TREND FOR SALES TO OCCUR AT END OF QUARTER. Our
software license revenue in any quarter depends on orders booked and shipped
in the last month, weeks or days of that quarter. At the end of each quarter,
we typically have either minimal or no backlog of orders for the subsequent
quarter. If a large number of orders or several large orders do not occur or
are deferred, our revenue in that quarter could be substantially reduced.
This could materially adversely affect our operating results and could impair
our business in future periods.

SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS COULD ADVERSELY AFFECT OUR
QUARTERLY OPERATING RESULTS

Our sales of software products have been affected by seasonal
purchasing trends. We expect these seasonal trends to continue in the future.
These seasonal trends materially affect our quarter-to-quarter operating
results. Revenue and operating results in our quarter ending December 31 are
typically higher relative to our other quarters, because many customers make
purchase decisions based on their calendar year-end budgeting requirements
and because of the effects of our sales incentive plans for sales personnel
which are measured on a calendar year basis. As a result, we have
historically experienced a substantial decline in revenue in the first
quarter of each fiscal year relative to the preceding quarter. Generally, we
expect our quarter ending September 30 to reflect the effects of summer
slowing of international business activity and spending activity generally
associated with that time of year, particularly in Europe.

ANY DELAYS IN OUR NORMALLY LENGTHY SALES CYCLES COULD RESULT IN SIGNIFICANT
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS

Our sales cycle typically takes many months to complete and varies
depending on the product, service or solution that we are selling. Any delay
in the sales cycle of a large transaction or a number of smaller transactions
could result in significant fluctuations in our quarterly operating results.
The length of the sales cycle may vary depending on a number of factors over
which we may have little or no control, including the size of a potential
transaction and the level of competition that we encounter in our selling
activities. Our sales cycle can be further extended for sales made through
third party distributors.

<PAGE>

OUR FUTURE REVENUE IS SUBSTANTIALLY DEPENDENT UPON OUR INSTALLED CUSTOMER
BASE; OUR ABILITY TO MAKE INVESTMENTS IS DEPENDENT UPON FUTURE REVENUE

We depend on our installed customer base for future revenues from
services and licenses of additional products. If our customers fail to renew
their maintenance agreements, this could materially adversely affect our
business and future quarterly and annual operating results. The maintenance
agreements are renewable annually at the option of the customers and there
are no minimum payment obligations or obligations to license additional
software. Therefore, our current customers may not necessarily generate
significant maintenance revenue in future periods. In addition, our customers
may not necessarily purchase additional products or services. Our services
revenue and maintenance revenue are also dependent upon the continued use of
these services by our installed customer base. Any downturn in our software
license revenue could adversely affect the growth of our services revenue in
future quarters. Moreover, our ability to continue to invest in product
development and to acquire technology from or make investments in other
companies is dependent on both license and service revenues. If either
license revenue or revenue from services declines, we may not have sufficient
cash to finance investments or enter into such arrangements. Either of these
events could materially, adversely affect our business, operating results and
financial condition.

OUR SENIOR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR
BUSINESS

We recently announced changes to our senior management with the
appointment of Jean-Yves F. Dexmier as a member of our Board and to the
position of President and Chief Executive Officer, effective July 16, 1999.
Also effective July 16, 1999, Mr. Finocchio resigned his position as
President and Chief Executive Officer but will continue to be actively
involved in the management of our business in his capacity as the Chairman of
the Board. Although we anticipate a smooth transition, the change could
disrupt our business, management team and results of operations.

In July and early August, 1999, four of our senior executive
officers resigned. We cannot predict whether other senior executive officers
will also resign. The loss of the services of one or more of our current
senior executive officers or key employees could materially adversely affect
our business, results of operations and financial condition. Our success will
depend to a significant extent on the continued service of our current senior
executives and certain other key employees, including certain sales,
consulting, technical and marketing personnel. If we lost the services of one
or more of our current senior executives or key employees, this could
materially adversely affect our business, particularly if one or more of
those executives or key employees decided to join a competitor or otherwise
compete directly or indirectly with Informix. Of our senior executive
officers and key employees, only Mr. Finocchio, Chairman of the Board, and
our former President and Chief Executive Officer, is bound by an employment
agreement, the terms of which are nonetheless at-will. In addition, we do not
maintain key man life insurance on our employees and have no plans to do so.

OUR NEW EXECUTIVE TEAM MAY NOT BE ABLE TO SUCCESSFULLY WORK TOGETHER TO MEET
OUR BUSINESS OBJECTIVES, WHICH COULD ADVERSELY AFFECT OUR BUSINESS

As noted above, Mr. Dexmier was appointed as our President and Chief
Executive Officer in July, 1999, and Howard A. Bain III joined us as our
Executive Vice President, Finance and Chief Financial Officer in January,
1999. In addition, two new executive officers, our Vice President and
Treasurer and our Vice President and General Manager, Datawarehouse, joined
us in July, 1999. Almost all of the rest of our executive officers have
joined us since the beginning of fiscal 1998. Since joining us, the new
management team, except for our most recent additions, has devoted
substantial efforts to restructuring our sales, marketing and finance
organizations after the announcement of the restatement of our financial
results for fiscal 1994, 1995 and 1996 and the first quarter of fiscal 1997
as a result of errors and irregularities identified with our revenue
recognition practices during these periods. In addition, as we have
announced, we are restructuring our business to expand our ability to deliver
products and solutions for the Internet, including e-commerce solutions, and
business intelligence solutions driven by our data warehouse technology. Our
management team has not worked together previously and may not be able to
successfully implement this strategy. If our management team is unable to
accomplish our business objectives, it could materially adversely affect our
business and our future quarterly and annual operating results.

WE MAY BE UNABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED

We may be unable to attract, train and retain qualified personnel, and
the failure to do so, particularly in key functional areas such as product
development and sales, could materially adversely affect our business, results
of operations and financial condition. Our future success will likely depend in
large part on our ability to attract and retain additional experienced sales,
technical, marketing and management personnel. Competition for such personnel in
the computer software industry is intense, and in the past we have experienced
difficulty in recruiting qualified personnel, especially developers and sales
personnel. We expect competition for qualified personnel to remain intense, and
we may not succeed in attracting or retaining such personnel. In addition, new
employees generally require substantial training in the use of our products.
This training will require substantial resources and management attention.

PENDING LITIGATION COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS

Since April 16, 1997, various holders of our Common Stock have filed
over 20 separate lawsuits against us, Ernst & Young LLP (who served as our
former independent auditors), and certain of our current and former officers
and directors.

<PAGE>

As we disclosed previously, however, on May 26, 1999 we entered into a
memorandum of understanding regarding the settlement of the pending lawsuits.
Although we anticipate that the settlement described in the memorandum of
understanding will be approved by the courts, if the courts were to reject
the settlement, prosecution of the lawsuits could continue. If that occurred,
the uncertainty associated with the substantial unresolved lawsuits could
materially adversely affect our business and financial condition. In
particular, the lawsuits could harm our relationships with existing customers
and our ability to obtain new customers. The continued defense of the
lawsuits could also result in the diversion of management's time and
attention away from business operations, which could adversely affect our
business. The lawsuits could also have the effect of discouraging potential
acquirors from bidding for us or reducing the consideration they would
otherwise be willing to pay in connection with an acquisition. In addition,
if the proposed settlement is not approved by the courts, we may be unable to
determine the amount, if any, we may be required to pay in connection with
the resolution of these lawsuits, by settlement or otherwise. The size of any
such payment could materially adversely affect our financial condition. Most
of the lawsuits have been filed as purported class actions by persons who
claim that they purchased our Common Stock during a purported class period.
The complaints allege violations of federal and state securities laws, fraud,
and violations of California's unfair business practices statutes. The
complaints, in general, do not specify the amount of damages that plaintiffs
seek.

Other than the $97 million expensed during the second quarter of
1999 in connection with the proposed litigation settlement, we have not set
aside any additional financial reserves relating to any of these lawsuits.

THE PENDING SEC INVESTIGATION COULD ADVERSELY AFFECT OUR BUSINESS

In July 1997, the SEC issued a formal order of investigation of us
and certain unidentified individuals associated with us. The investigation
relates to non-specified accounting matters, financial reports, other public
disclosures and trading activity in our Common Stock. Any action by the SEC
against us as a result of the investigation could materially adversely affect
our business.

THERE ARE A NUMBER OF FACTORS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT
COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS

Our international operations are, and any expanded international
operations will be, subject to a variety of risks associated with conducting
business internationally that could materially adversely affect our business
and future quarterly and annual operating results, including the following:

- Difficulties in staffing and managing international operations

- Problems in collecting accounts receivable

- Longer payment cycles

- Fluctuations in currency exchange rates

- Seasonal reductions in business activity during the summer months
in Europe and certain other parts of the world

- Uncertainties relative to regional, political and economic
circumstances

- Recessionary environments in foreign economies

- Increases in tariffs, duties, price controls or other restrictions
on foreign currencies or trade barriers imposed by foreign
countries

International sales represented approximately 50% of our total revenue
during the first half of 1999. In particular, instability in the Asian-Pacific
and Latin American economies and financial markets, which combined accounted for

<PAGE>

approximately 20% of our total net revenues during the first half of 1999, could
materially adversely affect our operating results in future quarters.

FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
TRANSACTION LOSSES

Despite our efforts to manage foreign exchange risk, there can be no
assurances that our hedging activities will adequately protect us against the
risks associated with foreign currency fluctuations. As a consequence, our
business, results of operations and financial condition could be materially
adversely affected by fluctuations in foreign currency exchange rates. Most of
our international revenue and expenses are denominated in local currencies. Due
to the substantial volatility of currency exchange rates, among other factors,
we cannot predict the effect of exchange rate fluctuations on our future
operating results. Although we take into account changes in exchange rates over
time in our pricing strategy, we do so only on an annual basis, resulting in
substantial pricing exposure as a result of foreign exchange volatility during
the period between annual pricing reviews. In addition, as noted previously, the
sales cycles for our products are relatively long. Foreign currency fluctuations
could, therefore, result in substantial changes in the financial impact of a
specific transaction between the time of initial customer contact and revenue
recognition.

In addition to the hedging program described above, we have implemented
a foreign exchange hedging program consisting principally of the purchase of
forward foreign exchange contracts, which is intended to hedge the value of
intercompany accounts receivable or intercompany accounts payable denominated in
foreign currencies against fluctuations in exchange rates until such receivables
are collected or payables are disbursed. This program involves the use of
forward contracts in the primary European and Asian currencies. Uncertainties
related to the Euro conversion could adversely affect our hedging activities.

FAILURE TO CONTINUE TO STRENGTHEN OUR INTERNAL ACCOUNTING CONTROLS COULD
ADVERSELY AFFECT OUR BUSINESS

Although we have made significant progress in our efforts to
strengthen our accounting controls and processes, we may not be able to hire
and retain enough finance personnel to continue to do so. If we are unable to
continue to strengthen our accounting controls and processes, it could
adversely affect our ability to accurately forecast and report our financial
results.

<PAGE>

RIGHTS OF SERIES B PREFERRED STOCKHOLDERS MAY ADVERSELY AFFECT OUR COMMON
STOCKHOLDERS

At June 30, 1999, 21,000 shares of Series B Preferred Stock remained
outstanding. Holders of the Series B Preferred shares have certain rights that
may adversely affect holders of our Common Stock.

RIGHTS TO CONSENT TO CORPORATE TRANSACTIONS. Our agreements with the purchasers
of the Series B Preferred Stock contain covenants that could impair our ability
to engage in various corporate transactions in the future, including financing
transactions and certain transactions involving a change-in-control or
acquisition of our assets or equity, or that could otherwise be disadvantageous
to us and the holders of our Common Stock. In particular, an acquisition of our
assets or equity may not be affected without the consent of the holders of the
outstanding Series B Preferred Stock or without requiring the acquiring entity
to assume the Series B Preferred Stock or cause the Series B Preferred Stock to
be redeemed. These provisions are likely to make an acquisition more difficult
and expensive and could discourage potential acquirors. We made certain
covenants in connection with the issuance of the Series B Preferred Stock which
could limit our ability to obtain additional financing by, for example,
providing the holders of the Series B Preferred Stock certain rights of first
offer and prohibiting us from issuing additional Preferred Stock without the
consent of the Series B Preferred Stockholders.

CONVERSION RIGHTS. The shares of Series B Preferred Stock are convertible into
shares of our Common Stock based on the trading prices of the Common Stock
during future periods that are described in the Series B Preferred Stock
financing agreement. As a result, we are unable to determine the number of
shares of our Common Stock that may ultimately be issued upon conversion. If the
conversion price of the Series B Preferred Stock is determined during a period
when the trading price of our Common Stock is low, the resulting number of
shares of our Common Stock issuable upon conversion of the Series B Preferred
Stock could result in greater dilution to the holders of our Common Stock. We
are also obligated to issue upon conversion of the Series B Preferred Stock
additional warrants to acquire shares of our Common Stock equal to 20% of the
total number of shares of Common Stock into which the Series B Preferred Stock
converts. The exercise of these warrants will have further dilutive effect to
the holders of our Common Stock. As of June 30, 1999, Series B Preferred
stockholders had converted an aggregate of 29,000 shares of Series B Preferred
Stock into 6,814,676 shares of our Common tock and warrants to purchase an
aggregate of 1,562,923 shares of our Common Stock. At June 30, 1999, 21,000
shares of Series B Preferred Stock remained outstanding and assuming a $4.00 per
share conversion price, were convertible into 5,250,000 shares of our Common
Stock and, assuming such conversion, warrants to purchase an aggregate of
1,050,000 additional shares of our Common Stock would become issuable upon such
conversion.

PENALTY PROVISION. The terms of the Series B Preferred financing agreement also
includes certain penalty provisions that are triggered if we fail to satisfy
certain obligations. For instance, we must keep a registration statement
ineffect for the resale of shares of our Common Stock issued or issuable upon
conversion of the Series B Preferred shares and upon exercise of the warrants.

<PAGE>

WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY RIGHTS WHICH OFFER ONLY LIMITED
PROTECTION AGAINST POTENTIAL INFRINGERS; IF WE CANNOT PROTECT OUR INTELLECTUAL
PROPERTY RIGHTS, THIS COULD ADVERSELY AFFECT OUR BUSINESS

Our success will continue to be heavily dependent upon proprietary
technology. We rely primarily on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect our proprietary rights. These means of protecting our
proprietary rights may not be adequate and our inability to protect our
intellectual property rights may adversely affect our business and financial
condition. We currently hold eight United States patents and several pending
applications. There can be no assurance that any other patents covering our
inventions will issue or that any patent, if issued, will provide sufficiently
broad protection or will prove enforceable in actions against alleged
infringers.

Our products are generally licensed to end-users on a "right-to-use"
basis under a license that restricts the use of the products for the customer's
internal business purposes. We also rely on "shrink-wrap" and "click-wrap"
licenses, which include a notice informing the end-user that, by opening the
product packaging or in the case of a click-wrap license by clicking on an
acceptance icon and downloading the product, the end-user agrees to be bound by
our license agreement. Despite such precautions, it may be possible for
unauthorized third parties to copy aspects of our current or future products or
to obtain and use information that we regard as proprietary. In addition, we
have licensed the source code of our products to certain customers under certain
circumstances and for restricted uses. We have also entered into source code
escrow agreements with a number of our customers that generally require release
of source code to the customer in the event we enter bankruptcy or liquidation
proceedings or otherwise ceasing to conduct business.

We may also be unable to protect our technology because:

- Our competitors may independently develop similar or superior
technology

- Policing unauthorized use of our software is difficult

- The laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States

- "Shrink-wrap" and/or "click-wrap" licenses may be wholly or
partially unenforceable under the laws of certain jurisdictions

- Litigation to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the
proprietary rights of others could result in substantial costs and
diversion of resources and could materially adversely affect our
business, future operating results and financial condition

THIRD PARTIES IN THE FUTURE COULD ASSERT THAT OUR PRODUCTS INFRINGE THEIR
INTELLECTUAL PROPERTY RIGHTS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS

Third parties may claim that our current or future products infringe
their proprietary rights. Any claim of this type could affect our relationships
with existing customers and prevent future customers from licensing our
products. Any such claim, with or without merit, could be time consuming, result
in costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. Royalty or license agreements may not be
available on acceptable terms or at all. We expect that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the software industry segment grows and the
functionality of products in different industry segments overlaps. As a result
of these factors, infringement claims could materially adversely affect our
business.

ERRORS IN OUR PRODUCTS OR THE FAILURE OF OUR PRODUCTS TO CONFORM TO CUSTOMER
SPECIFICATIONS OR EXPECTATIONS COULD RESULT IN OUR CUSTOMERS DEMANDING REFUNDS
FROM US OR ASSERTING CLAIMS FOR DAMAGES AGAINST US OR IN DECREASED SALES OF OUR
PRODUCTS

Because our software products are complex, they often contain errors or
"bugs" that can be detected at any point in a product's life cycle. While we
continually test our products for errors and work with customers through our
customer support services to identify and correct bugs in our software, we
expect that errors in our products will continue to be found in the future.
Although many of these errors may prove to be immaterial, certain of these
errors could be significant. Detection of any significant errors may result in,
among other things, loss of, or delay in, market acceptance and sales of our
products, diversion of development resources, injury to our reputation, or
increased service and warranty costs. These problems could materially adversely
affect our business and future quarterly and annual operating results.

A key determinative factor in our future success will continue to be
the ability of our products to operate and perform well with existing and future
leading, industry-standard application software products intended to be used in
connection with RDBMS products. Failure to meet in a timely manner existing or
future interoperability and performance requirements of certain independent
vendors could adversely affect the market for our products.

Commercial acceptance of our products and services could also be
adversely affected by critical or negative statements or reports by brokerage
firms, industry and financial analysts and industry periodicals about us, our
products or business or by the advertising or marketing efforts of competitors,
or other factors that could adversely affect consumer perception.

PRODUCT LIABILITY CLAIMS ASSERTED AGAINST US IN THE FUTURE COULD ADVERSELY
AFFECT OUR BUSINESS

We may be subject to claims for damages related to product errors in
the future. Although we have not experienced any product liability claims to
date, the sale and support of our products entail the risk of such claims.
While we carry insurance policies covering this type of liability, these
policies may not provide sufficient protection should a claim be asserted. A
material product liability claim could materially adversely affect our
business. Our license agreements with our customers typically contain
provisions designed to limit exposure to potential product liability claims.
Such limitation of liability provisions may, however, not be effective under
the laws of certain jurisdictions to the extent local laws treat certain
warranty exclusions as unenforceable. In addition, issues relating to Year
2000 compliance have increased awareness of the potential adverse effects of
software defects and malfunctions.

<PAGE>

POTENTIAL YEAR 2000 PROBLEMS WITH OUR SOFTWARE OR OUR INTERNAL OPERATING SYSTEMS
COULD ADVERSELY AFFECT OUR BUSINESS

THIRD PARTY EQUIPMENT AND SOFTWARE. We may incur large costs and the disruption
of our business if any key systems fail as a result of Year 2000 problems. We
use third party equipment and software that may not be Year 2000 compliant. If
this third party equipment or software does not operate properly with regard to
the Year 2000, we may incur unexpected expenses to remedy any problems. These
costs may materially adversely affect our business. In addition, if our key
systems, or a significant number of our systems, failed as a result of Year 2000
problems we could incur substantial costs and disruption of our business. To the
extent we are relying on the products of other vendors to resolve Year 2000
issues, we may experience delays in implementing the products. The failure to
correct a significant Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations which could harm
our business. In addition, we may not have enough available personnel to
implement and complete in a timely manner our Year 2000 project.

CUSTOMER BUYING PATTERNS. Purchasing patterns of our customers and potential
customers may be affected by Year 2000 issues. Many companies are spending
significant resources to correct their current software systems for Year 2000
compliance. Customers with limited IT budgets who face material Year 2000 issues
may increasingly spend their limited resources remediating these Year 2000
problems instead of investing in more general IT management products such as our
products. We expect this customer focus on remediating Year 2000 issues to
increase as January 1, 2000 approaches.

OUR PRODUCTS. If any of our licensees experience Year 2000 problems as a result
of their use of our software products, those licensees could assert claims for
damages which, if successful, could materially adversely affect our business,
future operating results and financial condition. In the ordinary course of our
business, we test and evaluate our software products. We believe that our
software products are generally Year 2000 compliant, meaning that the use or
occurrence of dates on or after January 1, 2000 will not adversely affect the
performance of our products with respect to four-digit year dates or the ability
of our products to correctly create, store, process and output information
related to such date data, including Leap Year calculations. However, we may
learn that certain of our software products do not contain all necessary
software routines and codes necessary for the accurate calculation, display,
storage and manipulation of such date data. In addition, in certain cases, we
have warranted that the use or occurrence of dates on or after January 1, 2000
will not adversely affect the performance of our products with respect to four
digit date dependent data or the ability to create, store, process and output
information related to such data.

For a more detailed description of our Year 2000 preparedness assessment,
see "Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Year 2000 Compliance."

<PAGE>

COSTS ASSOCIATED WITH EURO CONVERSION ISSUES MAY ADVERSELY AFFECT OUR BUSINESS

Costs associated with conversion to the Euro could materially adversely
affect our operating results and financial condition. We have reviewed the
effect of the conversion to the Euro on the prices of our products in the
affected countries. As a result, we have made some adjustments to our prices to
attempt to eliminate differentials that were identified. We have not completed
our review of the impact of conversion to the Euro on our business, but it is
possible that costs associated with ensuring that our products and internal
operating systems are able to effectively work with the Euro conversion, or
price adjustments resulting from the Euro conversion, could be material to our
business.

OUR UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS
MAY ADVERSELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND THE VOTING RIGHTS
OF THE HOLDERS OF COMMON STOCK

Our Board is authorized to issue up to 5,000,000 shares of undesignated
Preferred Stock in one or more series. Of the 5,000,000 shares of Preferred
Stock, 440,000 shares have been designated Series A Preferred, none of which is
outstanding; 440,000 shares have been designated Series A-1 Preferred, none of
which is outstanding; 50,000 shares have been designated Series B Preferred, of
which 21,000 shares remained outstanding as of June 30, 1999. Subject to the
prior consent of the holders of the Series B Preferred Stock, the Board can fix
the price, rights, preferences, privileges and restrictions of such Preferred
Stock without any further vote or action by our stockholders. However, the
issuance of shares of Preferred Stock may delay or prevent a change in control
transaction without further action by our stockholders. As a result, the market
price of our Common Stock and the voting and other rights of the holders of our
Common Stock may be adversely affected. The issuance of Preferred Stock with
voting and conversion rights may adversely affect the voting power of the
holders of our Common Stock, including the loss of voting control to others.

CERTAIN PROVISIONS IN OUR CHARTER DOCUMENTS MAY INHIBIT POTENTIAL ACQUISITION
BIDS; THIS MAY ADVERSELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND
PREVENT CHANGES IN OUR MANAGEMENT

Certain provisions of our charter documents are designed to reduce our
vulnerability to an unsolicited acquisition proposal. These include:

- Elimination of the right of stockholders to act without holding a
meeting

- Certain procedures for nominating directors and submitting proposals
for consideration at stockholder meetings

- A board of directors divided into three classes, with each class
standing for election once every three years

These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the Board and in the policies formulated by
the Board and to discourage certain types of transactions involving an actual or
threatened change of control. These provisions are designed to reduce our
vulnerability to an unsolicited acquisition proposal and, accordingly, could
discourage potential acquisition proposals and could delay or prevent a change
in control. Such provisions are also intended to discourage certain tactics that
may be used in proxy fights but could, however, have the effect of discouraging
others from making tender offers for shares of our Common Stock and,
consequently, may also inhibit fluctuations in the market price of our Common
Stock that could result from actual or rumored takeover attempts.

<PAGE>

These provisions may also have the effect of preventing changes in our
management. In addition, we have adopted a rights agreement, commonly
referred to as a "poison pill," that grants holders of our Common Stock
preferential rights in the event of an unsolicited takeover attempt. These
rights are denied to any stockholder involved in the takeover attempt and
this has the effect of requiring cooperation with our Board. This may also
prevent an increase in the market price of our Common Stock resulting from
actual or rumored takeover attempts. The rights agreement could also
discourage potential acquirors from making unsolicited acquisition bids.

DELAWARE LAW MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS MAY ADVERSELY AFFECT
THE MARKET PRICE FOR INFORMIX COMMON STOCK AND PREVENT CHANGES IN OUR MANAGEMENT

We are incorporated in Delaware and are subject to the antitakeover
provisions of the Delaware General Corporation Law, which regulates corporate
acquisitions. Delaware law prevents certain Delaware corporations, including
those corporations, such as us, whose securities are listed for trading on the
Nasdaq National Market, from engaging, under certain circumstances, in a
"business combination" with any "interested stockholder" for three years
following the date that the stockholder became an interested stockholder. For
purposes of Delaware law, a "business combination" would include, among other
things, a merger or consolidation involving us and an interested stockholder and
the sale of more than 10% of our assets. In general, Delaware law defines an
"interested stockholder" as any entity or person beneficially owning 15% or more
of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by such entity or person. Under
Delaware law, a Delaware corporation may "opt out" of the antitakeover
provisions. We do not intend to "opt out" of these antitakeover provisions of
Delaware Law.

OUR COMMON STOCK LIKELY WILL BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME
FLUCTUATIONS DUE TO A NUMBER OF FACTORS, CERTAIN OF WHICH ARE BEYOND OUR CONTROL

Stock prices and trading volumes for many software companies fluctuate
widely for a number of reasons, including some reasons which may be unrelated to
their businesses or results of operations. This market volatility, as well as
general domestic or international economic, market and political conditions,
could materially adversely affect the market price of our Common Stock without
regard to our operating performance. In addition, our operating results may be
below the expectations of public market analysts and investors. If this were to
occur, the market price of our Common Stock would likely decrease significantly.
The market price of our Common Stock has fluctuated significantly in the past
and may continue to fluctuate significantly because of:

- Market uncertainty about our business prospects or the prospects for
the RDBMS and ORDBMS markets in general

- Revenues or results of operations that do not match analysts'
expectations

- The introduction of new products or product enhancements by us or our
competitors

- General business conditions in the software industry

- Changes in the mix of revenues attributable to domestic and
international sales

- Seasonal trends in technology purchases and other general economic
conditions

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

DISCLOSURES ABOUT MARKET RATE RISK

INTEREST RATE RISK. Our exposure to market rate risk for changes in
interest rates relates primarily to our investment portfolio. We do not use
derivative financial instruments in our investment portfolio. We place our
investments with high quality issuers and, by policy, limit the amount of credit
exposure to any one issuer. We are averse to principal loss and ensure the
safety and preservation of our invested funds by limiting default, market and
reinvestment risk. We classify our cash equivalents and short-term investments
as "fixed-rate" if the rate of return on such instruments remains fixed over
their term. These "fixed-rate" investments include fixed-rate U.S. government
securities, municipal bonds, time deposits and certificates of deposits. We
classify our cash equivalents and short-term investments as "variable rate" if
the rate of return on such investments varies based on the change in a
predetermined index or set of indices during their term. These "variable-rate"
investments primarily include money market accounts held at various securities
brokers and banks. The table below presents the amounts and related weighted
interest rates of our investment portfolio at June 30, 1999:
<TABLE>
<CAPTION>
Average Fair
Interest Rate Cost Value
------------- ---------- -----------
<S> <C> <C> <C>
Cash equivalents:
Fixed rate................. 5.04% $ 44,412 $ 44,427
Variable rate.............. 4.42% 1,108 1,108
Short-term investments
Fixed rate................. 5.18% 80,271 80,202
</TABLE>

FOREIGN CURRENCY EXCHANGE RATE RISK. We enter into foreign currency
forward exchange contracts to reduce our exposure to foreign currency risk due
to fluctuations in exchange rates underlying the value of intercompany accounts
receivable and payable denominated in foreign currencies (primarily European and
Asian currencies) until such receivables are collected and payables are
disbursed. A foreign currency forward exchange contract obligates us to exchange
predetermined amounts of specified foreign currencies at specified exchange
rates on specified dates or to make an equivalent U.S. dollar payment equal to
the value of such exchange. These foreign exchange forward contracts are
denominated in the same currency in which the underlying foreign receivables or
payables are denominated and bear a contract value and maturity date which
approximate the value and expected settlement date of the underlying
transactions. For contracts that are designated and effective as hedges,
discounts or premiums (the difference between the spot exchange rate and the
forward exchange rate at inception of the contract) are accreted or amortized to
other expenses over the contract lives using the straight-line method while
unrealized gains and losses on open contracts at the end of each accounting
period resulting from changes in the spot exchange rate are recognized in
earnings in the same period as gains and losses on the underlying foreign
currency denominated receivables or payables are recognized, and generally
offset. Contract amounts in excess of the carrying value of our foreign currency
denominated accounts receivable or payable balances are marked to market, with
changes in market value recorded in earnings as foreign exchange gains or
losses. We operate in certain countries in Latin America, Eastern Europe, and
Asia/Pacific where there are limited forward foreign currency exchange markets
and thus we have unhedged transaction exposures in these currencies.

Most of our international revenue and expenses are denominated in local
currencies. Due to the substantial volatility of currency exchange rates, among
other factors, we cannot predict the effect of exchange rate fluctuations on our
future operating results. Although we take into account changes in exchange
rates over time in our pricing strategy, we do so only on an annual basis,
resulting in substantial pricing exposure as a result of foreign exchange
volatility during the period between annual pricing reviews. In addition, the
sales cycle for our products is relatively long, depending on a number of
factors including the level of competition and the size of the transaction. At
various times, we have attempted to reduce this exposure by entering into
foreign currency forward exchange contracts to hedge up to 80% of the forecasted
net income of our foreign subsidiaries of up to one year in the future. Such
forward foreign currency exchange contracts do not qualify as hedges and,
therefore, are marked to market with unrealized gains and losses included in
other income (expense), net. As these forward foreign currency exchange
contracts mature, the realized gains and losses are included in net income as a

35
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED

component of other income (expense), net. The Company's ultimate realized
gain or loss with respect to foreign currency fluctuations will depend on the
foreign currency exchange rates and other factors in effect at the time the
forward foreign currency exchange contracts mature. The unrealized gain
(loss) on forward foreign currency exchange contracts outstanding at June 30,
1999 was not significant to the Company's operating results for the first six
months of 1999. Notwithstanding our efforts to manage foreign exchange risk,
there can be no assurances that our hedging activities will adequately
protect us against the risks associated with foreign currency fluctuations.

The table below provides information about our foreign currency forward
exchange contracts. The information is provided in U.S. dollar equivalents and
presents the notional amount (contract amount), the weighted average contractual
foreign currency exchange rates and fair value. Fair value represents the
difference in value of the contracts at the spot rate at June 30, 1999 and the
forward rate, plus the unamortized premium or discount. All contracts mature
within twelve months.

FORWARD CONTRACTS

Weighted-
Contract Average
AT JUNE 30, 1999 Amount Contract Rate Fair Value
- ---------------- ------------- ------------- -----------
(In thousands) (In thousands)
<S> <C> <C> <C>

Foreign currency to be sold under contract:
Japanese Yen....................................................$ 12,509 119.92 $ 152
Euro............................................................ 6,797 0.96 26
Korean Won...................................................... 5,155 1,164.00 (31)
Australian Dollar............................................... 2,963 1.52 4
Swiss Franc..................................................... 2,393 1.52 32
Singapore Dollar................................................ 2,364 1.69 19
Czech Republic Koruna........................................... 1,741 35.40 (1)
Other (individually less than $1 million)....................... 972 * (1)
------------- ------------

Total..............................................................$ 34,894 $ 200
============= ===========

Foreign currency to be purchased under contract:
British Pound...................................................$ 36,944 0.63 $ (37)
Other (individually less than $1 million)....................... 2,552 * 2
------------- -----------

Total..............................................................$ 39,496 $ (35)
============= ============

Total..............................................................$ 74,390 $ 165
============= ===========
</TABLE>
- ---

* Not meaningful

<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On May 26, 1999, we entered into a memorandum of understanding
regarding the settlement of pending private securities and related litigation
against us. The pending private securities and related litigation has been
previously disclosed in our quarterly report on Form 10-Q for the period ended
March 31, 1999. For a more detailed description of the legal proceedings, see
"Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Overview" and "Factors That May Affect Future Results -
Pending Litigation Could Materially Adversely Affect Our Business" and "Notes to
Unaudited Condensed Consolidated Financial Statements - Note G - Litigation."

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On June 22, 1999, holders of the Company's Series B Preferred Stock
converted 1,800 shares of Series B Preferred into 274,180 shares of the
Company's Common Stock. In connection with this conversion, the Company also
issued such Series B Preferred Stockholders a warrant to purchase up to 54,835
shares of Common Stock at a purchase price of $7.84 per share and paid cash
dividends in the amount of $143,014 to such stockholders.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

The 1999 Annual Meeting of Stockholders of the Company was held on May
6, 1999. The following matters were voted on at the Annual Meeting:

1. Election of Class III director to serve a three-year term expiring in 2002:

<TABLE>
<CAPTION>
VOTES
--------
BROKER
FOR WITHHELD ABSTENTIONS NONVOTES
----------- --------- ----------- --------
<S> <C> <C> <C> <C>
Robert J. Finocchio, Jr.............................. 172,551,925 1,036,495 0 0
</TABLE>

Each of the following director's term of office as a director continued
after the Annual Meeting:

Leslie G. Denend
Cyril J. Yansouni
George Reyes
Thomas A. McDonnell
James L. Koch

2. Ratification of the appointment of KPMG LLP as independent accountants for
the Company for the current fiscal year ending December 31, 1999:

<TABLE>
<CAPTION>
VOTES
---------
BROKER
FOR AGAINST ABSTENTIONS NONVOTES
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
172,774,442 1,036,495 0 0
</TABLE>

ITEM 5. OTHER INFORMATION

Not applicable.

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

EXHIBIT NO. EXHIBIT
- ----------- --------
<S> <C>
3.2 (f) * Amendment to Bylaws, dated July 16, 1999
27.1 Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K.

The Company filed a Current Report on Form 8-K on June 18, 1999 in
connection with the memorandum of understanding, dated May 26, 1999, related to
the settlement of pending private securities and related litigation against the
Company.

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

* Filed herewith

<PAGE>

SIGNATURES

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

INFORMIX CORPORATION

Dated: August 16, 1999 By: /s/ HOWARD A. BAIN III
---------------------------------------------
Howard A. Bain III
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL OFFICER)

/s/ STEPHANIE P. SCHWARTZ
---------------------------------------------
Stephanie P. Schwartz
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)

<PAGE>
EXHIBIT 3.2

AMENDMENT TO THE BYLAWS

INFORMIX CORPORATION

a Delaware corporation

I, Gary Lloyd, as Secretary of INFORMIX CORPORATION, certify that:

1. I am the Secretary of INFORMIX CORPORATION, a Delaware corporation
(the "Corporation").

2. On May 5, 1999, the Board of Directors of INFORMIX CORPORATION
approved the following amendment to Article III, Section 1 of the Bylaws of
INFORMIX CORPORATION, effective July 16, 1999:

Section 1. Management. The property, business and affairs of the
Corporation shall be managed by or under the direction of a Board of
Directors. The number of Directors of the Corporation (including
Directors to be elected by the holders of any one or more series of
Preferred Stock voting separately as a class or classes) shall be seven
(7). As used in these Bylaws, the terms "whole Board" or "whole Board
of Directors" mean the total number of Directors which the Corporation
would have if there were no vacancies. In addition to the powers and
authorities by these Bylaws and the Certificate of Incorporation
expressly conferred upon it, the Board of Directors may exercise all
such powers of the Corporation, and do all such lawful acts and things
as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.

Effective July 16, 1999 INFORMIX CORPORATION

/s/ Gary Lloyd
------------------------------------
Gary Lloyd, Secretary

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 125,595
<SECURITIES> 80,202
<RECEIVABLES> 201,762
<ALLOWANCES> 15,195
<INVENTORY> 0
<CURRENT-ASSETS> 428,073
<PP&E> 237,373
<DEPRECIATION> 172,887
<TOTAL-ASSETS> 587,407
<CURRENT-LIABILITIES> 348,151
<BONDS> 0
0
0
<COMMON> 1,905
<OTHER-SE> 235,868
<TOTAL-LIABILITY-AND-EQUITY> 587,407
<SALES> 200,176
<TOTAL-REVENUES> 403,356
<CGS> 19,194
<TOTAL-COSTS> 107,741
<OTHER-EXPENSES> 268,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,184
<INCOME-PRETAX> (67,254)
<INCOME-TAX> 4,465
<INCOME-CONTINUING> (71,719)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,719)
<EPS-BASIC> (0.38)
<EPS-DILUTED> (0.38)

</TABLE>