INFORMIX CORP, 8-K, 1999-11-10

INFORMIX CORP
8-K, 1999-11-10
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT: NOVEMBER 9, 1999
DATE OF EARLIEST EVENT REPORTED: OCTOBER 8, 1999

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

<TABLE>
<S> <C> <C>
DELAWARE 0-15325 94-3011736
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>

4100 BOHANNON DRIVE, MENLO PARK, CALIFORNIA 94025
(Address of principal executive offices of Registrant)

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

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ITEM 5. OTHER EVENTS.

On October 8, 1999, Informix Corporation, a Delaware corporation
("Informix"), completed its acquisition of Cloudscape, Inc., a California
corporation ("Cloudscape"), a privately-held provider of synchronized database
solutions for the remote and occasionally connected workforce. Included herein
as Exhibit 99.1 are (i) the audited supplemental consolidated financial
statements of Informix and subsidiaries as of December 31, 1998 and 1997 and for
each of the years in the three-year period ended December 31, 1998 and (ii) the
unaudited supplemental condensed consolidated financial statements of Informix
and subsidiaries as of September 30, 1999 and December 31, 1998 and for the nine
month periods ended September 30, 1999 and 1998. These supplemental consolidated
financial statements give retroactive effect to the acquisition of Cloudscape
which was accounted for as a pooling of interests.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

(a) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
23.1 Consent of KPMG LLP, Independent Auditors

23.2 Consent of Ernst & Young LLP, Independent Auditors

99.1 Selected Supplemental Consolidated Financial Data

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Index to Supplemental Consolidated Financial Statements

Schedule II--Valuation and Qualifying Accounts
</TABLE>

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SIGNATURES

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

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<S> <C> <C>
INFORMIX CORPORATION

Dated: November 9, 1999 By: /s/ HOWARD A. BAIN III
-----------------------------------------
Howard A. Bain III
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
</TABLE>

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EXHIBIT 23.1

CONSENT OF KPMG LLP, INDEPENDENT AUDITORS

We consent to incorporation by reference in the registration statements
(Nos. 333-01409, 33-11161, 33-22862, 333-31116, 33-31117, 333-31369, 33-31371,
33-50608, 33-50610, 33-56707, 333-61843, 333-70323, and 333-89231) on Form S-8
of Informix Corporation of our report dated November 5, 1999, relating to the
supplemental consolidated balance sheet of Informix Corporation and subsidiaries
as of December 31, 1998, and the related supplemental consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended, and
the related schedule as of and for the year ended December 31, 1998, which
report is included herein.

/s/ KPMG LLP

Mountain View, California
November 8, 1999

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EXHIBIT 23.2

CONSENT OF ERNST AND YOUNG LLP, INDEPENDENT AUDITORS

We consent to incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-01409, 33-11161, 33-22862, 333-31116, 33-31117, 333-31369,
33-31371, 33-50608, 33-50610, 33-56707, 333-61843, 333-70323, and 333-89231) of
our report dated March 2, 1998, with respect to the supplemental consolidated
balance sheet of Informix Corporation as of December 31, 1997, the related
supplemental consolidated statements of operations, stockholders' equity, cash
flows and financial statement schedule for each of the two years in the period
ended December 31, 1997, included in its Current Report on Form 8-K dated
November 9, 1999.

/s/ Ernst & Young LLP

San Jose, California
November 8, 1999

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EXHIBIT 99.1

SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA

The following selected supplemental consolidated financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Supplemental Consolidated Financial
Statements and Notes, and the Supplemental Unaudited Condensed Consolidated
Financial Statements and Notes included elsewhere in this document.

FINANCIAL OVERVIEW

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1999(3) 1998 1998(1) 1997(2) 1996 1995 1994
--------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues................ $ 620,424 $ 520,587 $ 735,506 $ 663,892 $734,540 $636,547 $451,969
Net income (loss)........... (53,934) 27,630 50,184 (360,388) (74,019) 38,600 48,293
Preferred stock dividend.... (829) (1,816) (3,478) (301) -- -- --
Value assigned to
warrants.................. -- (1,982) (1,982) (1,601) -- -- --
Net income (loss) applicable
to common stockholders.... (54,763) 23,832 44,724 (362,290) (74,019) 38,600 48,293
Net income (loss) per common
share:
Basic..................... (0.28) 0.14 0.26 (2.37) (0.49) 0.27 0.35
Diluted................... (0.28) 0.13 0.25 (2.37) (0.49) 0.26 0.34
Total assets................ 583,320 547,312 622,065 566,021 883,259 682,445 447,769
Long-term obligations....... 2,090 5,201 3,759 6,544 2,394 2,846 892
Retained earnings
(accumulated deficit)..... (283,848) (254,489) (231,934) (282,118) 78,269 154,098 115,668
</TABLE>

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(1) In fiscal 1998, we recorded restructuring-related adjustments that increased
operating income by $10.3 million and, in connection with our acquisition of
Red Brick in December 1998, recorded a charge to operations of $2.6 million
for in-process research and development which had not yet reached
technological feasibility and had no alternative future uses.

(2) In fiscal 1997, we recorded a restructuring charge of $108.2 million, a
write-down of certain assets in Japan of $30.5 million and a write-down of
capitalized software of $14.7 million.

(3) In the nine month period ended September 30, 1999, we recorded a charge of
$97.0 million related to the pending settlement of the private securities
and related litigation against us.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

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 October 1, 1999, the Company reorganized its operating business divisions
into four new business groups: the TransAct Business Group, which is responsible
for delivering on-line transaction processing products, the i.Foundation
Business Group, which is responsible for delivering products that provide the
technological foundation for Internet-based electronic commerce solutions; the
i.Informix Business Group, which is responsible for delivering Internet-based
solutions for electronic commerce; and the i.Intelligence Business Group, which
is responsible for delivering Internet-based data warehouse products and
solutions.

On May 26, 1999, we entered into a memorandum of understanding regarding the
settlement of pending private securities and related litigation against us,
including a federal class action, a derivative action, and a state class action.
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 auditors,
Ernst & Young LLP, will pay $34 million in cash. The total amount of the
settlement, which has received final approval with respect to the federal class
action and is pending final state court approval with respect to the derivative
and state class actions, 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

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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
nine-month period ended September 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 nine-month period ended September 30, 1999, we
maintained, and we continue to maintain, effective internal control over
financial reporting.

On December 31, 1998, we acquired Red Brick Systems, Inc. ("Red Brick"), a
provider of scaleable decision support solutions for data warehousing, data
marts, online analytical processing 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 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 October 8, 1999, we completed our acquisition of Cloudscape, Inc.,
("Cloudscape"), a privately-held provider of synchronized database solutions for
the remote and occasionally connected workforce. In the acquisition, the former
shareholders of Cloudscape received shares of our common stock in exchange for
their shares of Cloudscape at the rate of approximately 0.56 shares of our
common stock for each share of Cloudscape common stock (the "Cloudscape
Merger"). The Cloudscape Merger was accounted for as a pooling-of-interests. An
aggregate of 9,583,000 shares of our common stock were issued pursuant to the
Merger, and an aggregate of 417,000 options and warrants to purchase Cloudscape
common stock were assumed by us.

All of our financial data presented in the supplemental consolidated
financial statements and management's discussion and analysis of financial
condition and results of operations included within this Form 8-K have been
restated to include the historical financial information of Cloudscape in
accordance with generally accepted accounting principles applicable after
financial statements are issued for a period which includes the date of
consummation of a business combination and pursuant to Regulation S-X. Our
statement of operations for the nine-month period ended September 30, 1999 has
been combined with the Cloudscape statement of operations for the same period.
Our statement of operations for the nine-month period ended September 30, 1998
has been combined with the Cloudscape statement of operations for the nine-month
period ended December 31, 1998. Our statement of income for the year ended
December 31, 1998 has been combined with the Cloudscape statement of operations
for the year ended March 31, 1999. Our statement of operations for the year
ended December 31, 1997 has been combined with the Cloudscape statement of
operations for the year ended March 31, 1998. Our statement of operations for
the year ended December 31, 1996 has been combined with the Cloudscape statement
of operations for the period from August 2, 1996 (inception) through March 31,
1997. This presentation is in accordance with the rules and regulations of the
Securities and Exchange Commission (SEC) which require that the fiscal periods
combined in the supplemental consolidated financial statements be within 93 days
of

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Informix's fiscal period ends. As a consequence, the results of Cloudscape for
the three-month period ended March 31, 1999 are included in the results of
operations for both the year ended December 31, 1998 and the nine-month period
ended September 30, 1999. Cloudscape revenues and net loss for the three-month
period ended March 31, 1999 were $347,000 and $2,020,000, respectively.

The supplemental consolidated balance sheets at December 31, 1998 and 1997
combine the balance sheets of Cloudscape as of March 31, 1999 and 1998,
respectively. The supplemental consolidated balance sheet at September 30, 1999
combines the balance sheet of Cloudscape as of September 30, 1999.

RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

The following table and discussion compares the results of operations for
the years ended December 31, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------------------
1998 1997 1996
-------- -------- --------
PERCENT OF NET
REVENUES
<S> <C> <C> <C>
Net revenues:
Licenses.................................................. 52% 57% 68%
Services.................................................. 48 43 32
Total net revenues...................................... 100 100 100
Cost and expenses:
Cost of software distribution............................. 5 19 6
Cost of services.......................................... 21 25 20
Sales and marketing....................................... 37 63 56
Research and development.................................. 20 21 16
General and administrative................................ 10 13 9
Write-off of goodwill and long-term assets................ -- 5 --
Write-off of acquired research and development............ -- 1 --
Restructuring charges..................................... (1) 16 --
Merger expenses........................................... -- -- 1
Total expenses.......................................... 93 154 108
Operating income (loss)..................................... 7 (54) (8)
Net income (loss)........................................... 7% (54)% (10)%
</TABLE>

Our operating results for fiscal 1998 improved over the prior year due to
revenue growth of 11% and a reduction in operating expenses of 33%. The growth
in consolidated revenues was primarily derived in North America as sales
increased by 18% in this region during fiscal 1998, while Latin America and
Europe experienced revenue growth of 7% and 6%, respectively, during the same
period. Revenues in Asia/Pacific in fiscal 1998, while consistent with fiscal
1997 when translated into U.S. dollars, actually increased 16% on a
constant-currency basis. In an effort to keep operating expenses in line with
revenues, and as a result of our restructuring initiated in fiscal 1997, we
reduced total operating expenses as a percent of net revenues from 154% in
fiscal 1997 to 93% in fiscal 1998. The most significant cost-cutting efforts
were achieved in sales and marketing as we were able to reduce these
expenditures, as a percentage of net revenues, from 63% in fiscal 1997 to 37% in
fiscal 1998. In total dollars, sales and marketing expenses decreased from
$418.1 million in fiscal 1997 to $271.9 million in fiscal 1998, or 35%. We
believe that research and development is essential to maintaining our
competitive position in our primary markets and as a result increased research
and development expenditures by 6% in fiscal 1998. Revenue growth combined with
lower operating costs resulted in operating income of $53.3 million for fiscal
1998 compared to an operating loss of $359.5 million in fiscal 1997.

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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 for fiscal 1998 increased slightly to $383.9 million from
$378.2 million in fiscal 1997. We believe that this modest increase in license
revenues reflected a number of factors which affected us during fiscal 1998,
including an overall decrease in revenue growth rates in the RDBMS industry
worldwide, continued uncertainty in the Asia/Pacific economies and financial
markets as well as changes to our European management.

License revenues declined by 25% to $378.2 million for fiscal 1997 from
$502.7 million for fiscal 1996. We believe that this decrease was primarily
attributable to slowing growth in the market for RDBMS products and customer
uncertainty about our financial condition at that time. In addition, we
experienced a significant turnover in senior management sales positions during
fiscal 1997, which adversely affected sales.

Our increased focus on reseller channels in fiscal 1996 resulted in a
significant build-up of licenses that had not been resold or utilized by the
resellers. As discussed in Note 1 to our Consolidated Financial Statements for
the year ended December 31, 1998, 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. 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 Consolidated Financial Statements. Advances in the amount
of $121.1 million and $180.0 million had not been recognized as earned revenue
as of December 31, 1998 and 1997, respectively. During the year ended
December 31, 1998, we received $11.4 million in customer advances and recognized
revenue from resellers with previously recorded customer advances of $66.1
million. Included in the $66.1 million recognized were $61.7 million of licenses
which were resold or utilized by the reseller and $4.4 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 December 31, 1998, we had reached structured settlements with three
resellers with remaining rights to resell a total of $25.7 million of our
products. In accordance with the settlements, the minimum future reduction in
customer advances totals $18.4 million and $7.3 million for the years ended
December 31, 1999 and 2000, respectively.

In order to properly recognize revenue on arrangements where the reseller
has duplication rights, we rely on accurate and timely reports from resellers of
the quantity of licenses that have been resold or utilized. In instances where a
reseller does not submit a timely report, we accrue royalty revenue through the
end of the reporting period provided we have vendor specific historical
information. From time to time, late or inaccurate reports are identified or
corrected for a variety of reasons, including resellers updating their reports
or as a result of our proactive activities such as audits of the resellers'
royalty reports. As a result, revenue from these late or updated reports, which
was not previously accrued, is recognized in the period during which the reports
are received. Such revenue amounted to approximately $6.0 million for fiscal
1998. We expect that the late or inaccurate reporting of resale or utilization
of licenses by resellers and the resulting fluctuations will continue for the
foreseeable future.

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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 increased 23% to $351.6 million for
fiscal 1998 from $285.7 million for fiscal 1997. Service revenues also increased
23% in fiscal 1997 as compared to $231.8 million for fiscal 1996. Service
revenues accounted for 48%, 43% and 32% of total revenues in fiscal 1998, 1997
and 1996, respectively. The increase in service revenues, both in absolute
dollars and as a percentage of total revenues, is attributable primarily to
higher initial year maintenance fees and the renewal of maintenance contracts in
connection with our 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.

Consulting and training revenues remained flat at $97.9 million for fiscal
1998 as compared to $97.6 million in fiscal 1997. Consulting and training
revenues increased 34% to $97.6 million in fiscal 1997 from $72.8 million in
fiscal 1996. The growth in the consulting and training practice in fiscal 1997
was driven by increased demand for consulting services primarily in North
America and in Europe. In addition, some significant large consulting contracts
were executed in fiscal 1997 and contributed to the significant increase of
consulting revenues compared to the prior year.

COSTS AND EXPENSES

Cost of software distribution decreased to $35.4 million in fiscal 1998 from
$63.0 million and $46.8 million in fiscal 1997 and fiscal 1996, respectively.
Cost of software distribution as a percentage of license revenue was 9%, 17% and
9% in fiscal 1998, 1997 and 1996, respectively. The decrease in fiscal 1998,
both in absolute dollars and as a percentage of license revenue, was primarily
caused by a write-down in fiscal 1997 of $14.7 million to net realizable value
of certain of our database tool products related to our acquisition of
CenterView Software, Inc. ("CenterView") in the first quarter of fiscal 1997, a
decrease in third party software royalties, the write-off of certain unused
application software in the second quarter of fiscal 1997 and a reduction in
labor, materials and shipping costs. Amortization of capitalized software
remained relatively flat at $20.7 million in fiscal 1998 compared to $21.4
million in fiscal 1997 and increased 47% in fiscal 1997 as compared to $14.6
million for fiscal 1996. The increase in amortization of capitalized software in
fiscal 1997 over fiscal 1996 was due primarily to the release of our
object-relational Universal Data Option product in the fourth quarter of fiscal
1996. The amortization of capitalized software will vary from period to period
as new products are released and other products become fully amortized.

COST OF SERVICES. Cost of services consists primarily of maintenance,
consulting and training expenses. Cost of services for fiscal 1998 decreased by
7% to $155.9 million as compared to $166.9 million in fiscal 1997 and decreased
as a percentage of net service revenues to 44% for fiscal 1998 compared to 58%
for fiscal 1997. These decreases were primarily attributable to decreases of 11%
in average headcount for fiscal 1998 over the same period in 1997 as well as
improved efficiency and better control of outsourced expenses. Cost of services
increased 15% to $166.9 million for fiscal 1997 from $144.9 million for fiscal
1996. Cost of services decreased as a percentage of net service revenues to 58%
for fiscal 1997 compared to 62% for the same period in 1996. During fiscal 1997,
gross margins increased relative to both support revenue and consulting/training
revenue, particularly in the third and fourth quarters of that year. We believe
that the increased margins during fiscal 1997 were attributable principally to
more efficient delivery of services.

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SALES AND MARKETING EXPENSES. Sales and marketing expenses consist
primarily of salaries, commissions, marketing programs and related overhead
costs. Sales and marketing expenses decreased 35% to $271.9 million for fiscal
1998 from $418.1 million for fiscal 1997. Sales and marketing expenses increased
approximately 1% to $418.1 million for fiscal 1997 from $413.7 million for
fiscal 1996. As a percentage of net revenues, sales and marketing expenses
decreased to 37% in fiscal 1998 from 63% in fiscal 1997 and 56% in fiscal 1996.
The decrease in sales and marketing expenses in fiscal 1998 in absolute dollars
and as a percentage of net revenues, as compared to fiscal 1997 was primarily
the result of a significant reduction in average sales and marketing headcount
worldwide. The slight increase in sales and marketing expense in fiscal 1997 in
absolute dollars compared to fiscal 1996 was a result of continued increased
expenses in the early months of fiscal 1997, offset by a significant reduction
in overall sales and marketing expenses in the second half of fiscal 1997 in
connection with our restructuring.

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 6% to $149.6
million for fiscal 1998 from $141.5 million for fiscal 1997. The increase in
research and development expenses in absolute dollars for fiscal 1998 is
attributable primarily to increases in salary and benefits and a 15% decrease in
the amount of product development expenditures capitalized in fiscal 1998
compared to fiscal 1997. This decrease in capitalized expenditures is
attributable to the fact that, during the first half of fiscal 1997, a large
portion of expenditures incurred were on products that had reached technological
feasibility but had not yet been commercially released. Research and development
expenses increased 17% to $141.5 million for fiscal 1997 from $120.6 million for
fiscal 1996. The increase in research and development expenses for fiscal 1997
from fiscal 1996 is attributable principally to an increase in headcount, which
occurred during the early part of fiscal 1997, working on new products and
product extensions. The higher capitalization in absolute dollars of product
development expenditures in fiscal 1996 compared to fiscal 1997 also resulted
from an increase in the work involved on products that had already reached
technological feasibility as they neared their release dates.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of finance, legal, information systems, human resources, bad
debt expense and related overhead costs. General and administrative expenses
decreased 13% to $77.0 million for fiscal 1998 from $88.1 million for fiscal
1997 and increased 37% to $88.1 million from $64.5 million for fiscal 1996. The
decrease in fiscal 1998 in absolute dollars and as a percentage of net revenues
was primarily the result of a reduction in bad debt expense due to our efforts
to better manage both the amount and credit risk of our accounts receivable
balances, offset by increases in legal and other professional service fees,
consulting fees and average headcount. The increase in fiscal 1997 when compared
to fiscal 1996 was primarily due to the expansion of our international
operations and incremental legal expenses resulting from the stockholders'
litigation and auditing expenses relating to the restatement of our financial
statements.

WRITE-OFF OF GOODWILL AND OTHER LONG-TERM ASSETS. During the first quarter
of 1997, our Japanese subsidiary experienced a significant sales shortfall and
operating losses. Accordingly, we evaluated the ongoing value of the
subsidiary's long-lived assets (primarily computer and other equipment) and
goodwill. Based on this evaluation, we determined that the subsidiary's assets
had been impaired and wrote them down by $30.5 million to their estimated fair
values. Fair value was determined by using estimated future discounted cash
flows and/or resale market quotes as appropriate.

WRITE-OFF OF ACQUIRED RESEARCH AND DEVELOPMENT. On December 31, 1998, we
acquired Red Brick in a transaction which has been accounted for as a purchase.
We issued approximately 7.6 million shares of our common stock to acquire all of
the outstanding shares of Red Brick common stock. We also reserved an additional
2.5 million shares of our common stock for issuance in connection with the
assumption of Red Brick's outstanding stock options and warrants.

The purchase price was allocated to the fair value of the acquired assets
and assumed liabilities based on their fair values at the date of acquisition.
The total purchase price of $55.8 million included the

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issuance of stock and the assumption of stock options (together $35.9 million,
net of issuance costs), direct acquisition costs of $1.0 million, accrued merger
and integration costs of $7.9 million and liabilities assumed of $11.0 million.
Of the total purchase price, $2.6 million was allocated to in-process research
and development expense that had not yet reached technological feasibility and
has no alternative future uses, $7.8 million was allocated to cash and
short-term investments, approximately $10.2 million was allocated to other
tangible assets, $7.4 million was allocated to capitalized software, $4.7
million was allocated to the acquired workforce and $23.1 million was allocated
to goodwill. Goodwill, capitalized software and the acquired workforce are
intangible assets which will be amortized over their estimated lives, which
average five years.

The following two in-process research and development projects were acquired
in the acquisition of Red Brick:

RED BRICK WAREHOUSE ("WAREHOUSE") -- high-performance, client/server
RDBMS software product specifically designed for data warehousing, data
mart, data mining, and OLAP applications. Warehouse has been Red Brick's
core product and, as of December 31, 1998 (the "Valuation Date"), was being
sold as version 5.1, which was released in January 1998. We released
Informix Red Brick Warehouse version 5.1.7 on schedule during May 1999.

RED BRICK FORMATION ("FORMATION") -- ETML (Extract, Transfer, Move,
Load) product which was originally released as version 1.3 in
September 1998 (the current version as of the Valuation Date). Formation is
considered to be in the early stages of its product life cycle. New features
and functionality are currently under development and will be added in
subsequent releases. We released Red Brick Formation version 1.4 on schedule
during May 1999 and we anticipate that we will release Formation version 1.5
before the end of 1999 as originally estimated.

The fair value of the in-process technology was based on a discounted cash
flow model, similar to the traditional Income Approach. The Income Approach
involves five steps: (1) the annual after-tax cash flows the asset will generate
over its remaining useful life are estimated; (2) these cash flows are converted
to their present value equivalents using a required rate of return which
accounts for the relative risk of not realizing the annual cash flows and for
the time value of money; (3) the residual value, if any, of the asset at the end
of its remaining useful life is estimated; (4) the estimated residual value is
converted to its present value equivalent; and (5) the present value of the
estimated annual after-tax cash flows is added to the present value of the
residual value to obtain an estimate of the asset's fair value. The discount
rate used in discounting the estimated cash flows is based on the risks
associated with achieving such estimated cash flows upon successful completion
of the acquired projects. Associated risks include the inherent difficulties and
uncertainties in completing each project and thereby achieving technological
feasibility, and risks related to the impact of potential changes in market
conditions and technology.

In developing cash flow estimates, revenues were forecasted based on
relevant factors, including aggregate revenue growth rates for the business as a
whole, characteristics of the potential market for the technology and the
anticipated life of the underlying technology. Projected annual revenues for the
Warehouse and Formation projects were assumed to increase from product release
through 2000, decline slightly in 2001 and decline significantly in 2002 which
is estimated to be the end of the in-process technology's economic life. Cost of
software distribution and services, sales and marketing expense, research and
development expense and general and administrative expense were estimated as a
percentage of revenues throughout the forecast period. Gross profit was assumed
to be between 74% and 80% for both the Warehouse project and the Formation
project.

As certain other assets contribute to the cash flow attributable to the two
projects, returns to these other assets or capital charges were calculated and
deducted from the after-tax operating income to isolate the cash flow solely
attributable to the two projects. Accordingly, returns were deducted for working
capital, fixed assets (i.e. property and equipment) and the workforce in place.
We then discounted the estimated cash flows attributable to Warehouse and
Formation using a 18.0% discount rate.

8
<PAGE>
The fair value of the in-process research and development was allocated as
approximately $2.0 million and $0.6 million to the Warehouse and Formation
projects, respectively. We are not aware of any events which would significantly
alter the estimates used in the valuation of such component of the purchase
price.

The acquisition of Red Brick was a tax-free reorganization under the
Internal Revenue Code. Therefore, the charge for in-process research and
development and amortization of acquired intangible assets is not deductible for
income tax purposes.

In February 1997, we acquired all of the outstanding capital stock of
CenterView, a privately-owned company which developed and sold software
application development tools. The aggregate purchase price paid was
approximately $8.7 million, which included cash and direct acquisition costs.
The transaction was accounted for as a purchase and, based on an independent
appraisal of the assets acquired and liabilities assumed, the purchase price was
allocated to the net tangible and intangible assets acquired including developed
software technology, acquired workforce, in-process technology, and goodwill.
The in-process technology, which, based on the independent appraisal, was valued
at $7 million, had not reached technological feasibility at the date of
acquisition and had no alternative future uses in other research and development
projects. Consequently, its value was charged to operations in the first quarter
of fiscal 1997, the period in which the acquisition was consummated. The
remaining identifiable intangible assets are being amortized over three to five
years.

The in-process research and development project acquired in the acquisition
of CenterView consisted of the client/server software, "Data Director," that
combines the functionality of high-end client/server tools with the price and
openness of visual programming environments. Data Director is an integrated
development extension for Microsoft Visual Basic that enables companies to build
corporate Intranet and client/server applications in a single environment. As of
the date of acquisition, Data Director Version 2.1 was considered developed
technology while Data Director Versions 3.0 and 4.0 were considered in-process
technology which had not reached technological feasibility and did not have any
alternative future uses. Data Director Version 3.0 was scheduled for first
customer release in July 1997 while Version 4.0 was anticipated to reach first
customer release in April 1998, with commercial release to occur approximately
two to three months after first customer introduction of the product. The
expected aggregate costs to complete both Data Director Versions 3.0 and 4.0
were approximately $12.6 million.

The fair value of the in-process technology was based on projected cash
flows which were discounted based on the risks associated with achieving such
projected cash flows upon successful completion of the acquired projects.
Associated risks include the inherent difficulties and uncertainties in
completing each project and thereby achieving technological feasibility, and
risks related to the impact of potential changes in market conditions and
technology. In developing cash flow projections, revenues were forecasted based
on relevant factors, including aggregate revenue growth rates for the business
as a whole and for the database application development market, product family
revenues, the aggregate size of the database application development market,
anticipated product development and product introduction schedules, product
sales cycles, and the estimated life of the underlying technology.

Projected annual revenues for the Data Director in-process development
projects were assumed to increase from product release through 1999, decline
slightly in 2000 and decline significantly in 2001, which was estimated to be
the end of the in-process technology's economic life. Gross profit was assumed
to be 90% throughout the technology life cycle based on percentages estimated in
our aggregate business model. Estimated operating expenses, income taxes and
capital charges to provide a return on other acquired assets were deducted from
gross profit to arrive at net operating income. Operating expenses were
estimated as a percentage of revenue and included general and administrative
expenses, sales and marketing expenses and development costs to maintain the
technology once it achieved technological feasibility.

9
<PAGE>
The net cash flows of the in-process research and development projects were
discounted to their present values using a discount rate of 20%. This discount
rate approximated the overall rate of return for the acquisition of CenterView
as a whole and reflected the inherent uncertainties surrounding the successful
development of the in-process research and development projects and the
uncertainty of technological advances.

We are currently selling two versions of Data Director, one for Visual Basic
applications and the other for Web applications.

RESTRUCTURING CHARGES. In June and September 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. Accordingly, we recorded restructuring charges totaling
$108.2 million for fiscal 1997. The significant components of these
restructuring changes were severance and benefits, write-off of assets, and
facility charges. Severance and benefits represented the reduction of
approximately 670 employees, primarily sales and marketing personnel, on a
worldwide basis. Temporary employees and contractors were also reduced.
Write-off of assets included the write-off or write-down in carrying value of
equipment as a result of our decision to reduce the number of Information
Superstores throughout the world, as well as the write-off of equipment
associated with headcount reductions. The equipment subject to the write-offs
and write-downs consisted primarily of computer servers, workstations, and
personal computers that were no longer utilized in our operations. Facility
charges included early termination costs associated with the closing of certain
domestic and international sales offices.

During fiscal 1998, adjustments of $10.3 million were recorded to the
results of operations. These adjustments, which appear as a credit to
restructuring charges in our Consolidated Statement of Operations for the year
ended December 31, 1998, were due primarily to adjusting the estimated severance
and facility components of the fiscal 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 $5.8 million remained as a liability in our Consolidated Financial
Statements as of December 31, 1998, of which $5.2 million related to facility
charges. (See Note 13 to our Supplemental Consolidated Financial Statements.)

INTEREST INCOME. Interest income for fiscal 1998 was $11.7 million as
compared to $5.8 million and $9.9 million for fiscal 1997 and 1996,
respectively. The increase in fiscal 1998 in comparison to fiscal 1997 resulted
from an increase in the average interest-bearing cash and short-term investment
balances in fiscal 1998 due to increased sales and operating income as well as
approximately $2.4 million in interest income related to income tax refunds
received during fiscal 1998. The reduction in interest income from fiscal 1996
to fiscal 1997 was due to a reduction in the average interest-bearing cash and
short-term investment balances in fiscal 1997.

INTEREST EXPENSE. Interest expense decreased to $5.8 million for fiscal
1998 from $9.4 million and $12.5 million for fiscal 1997 and 1996, respectively.
Interest expense for fiscal 1998 consists primarily of interest charges related
to payments on capital leases. Interest expense for fiscal 1997 and fiscal 1996
related to interest charges incurred in connection with financing of customer
accounts receivable, in addition to interest charges related to payments on
capital leases. We did not enter into any accounts receivable financing
transactions in fiscal 1998.

OTHER INCOME (EXPENSE), NET. Other income (expense), net, decreased to a
net other expense of $4.6 million for fiscal 1998 from net other income of $10.5
million and $2.9 million for fiscal 1997 and 1996, respectively. Other income
(expense), included $4.8 million of foreign currency transaction losses and $8.0
million of foreign currency transaction gains in fiscal 1998 and fiscal 1997,
respectively. Approximately $7.5 million of the $8.0 million of foreign currency
transaction gains recognized in fiscal 1997 resulted primarily from a change in
our foreign currency denominated intercompany accounts payable and accounts

10
<PAGE>
receivable balances arising from the restatement of our 1996, 1995 and 1994
financial statements. Other components of other income (expense) included $8.1
million and $3.9 million of net gains on the sale of long-term investments in
fiscal 1997 and fiscal 1996, respectively, as well as the downward adjustment of
$4.5 million to the carrying value of certain investments in fiscal 1997.

INCOME TAXES. In fiscal 1998, income tax expense resulted primarily from
foreign withholding taxes and taxable earnings in certain foreign jurisdictions.
We have provided a valuation allowance for the net deferred tax assets that are
dependent on future taxable income. The expected tax expense of $19.1 million,
computed by applying the federal statutory rate of 35% to the income before
income taxes, was offset primarily by a $11.2 million decrease in the valuation
allowance and a $4.4 million net foreign tax benefit.

In fiscal 1997, income tax expense resulted primarily from foreign
withholding taxes and taxable earnings in certain foreign jurisdictions. The
expected tax benefit computed by applying the federal statutory rate to the loss
before income taxes was substantially offset by a corresponding increase in the
valuation allowance for net deferred tax assets. We have provided a valuation
allowance for the net deferred tax assets in excess of amounts recoverable
through carryback of net operating losses. Accordingly, the net deferred tax
asset at December 31, 1997 of $34 million was provided for anticipated IRS tax
refunds, which were received during fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments......... $226.6 $ 157.6 $ 262.1
Working capital (deficit)................................. 31.3 (138.8) 3.0
Cash and cash equivalents provided by (used in)
operations.............................................. 21.4 (147.7) (29.7)
Cash and cash equivalents used for investment
activities.............................................. (60.2) (63.5) (145.5)
Cash and cash equivalents provided by financing
activities.............................................. 66.6 119.7 230.3
</TABLE>

OPERATING CASH FLOWS. We generated positive cash flows from operations
totaling $21.4 million for fiscal 1998 as compared to cash used in operations of
$147.7 million and $29.7 million for fiscal 1997 and 1996, respectively. This
significant increase in operating cash flows was due primarily to our improved
profitability in fiscal 1998, offset by significant fluctuations in the effect
of restructuring charges and changes in accounts receivable on operating cash
flows. Net income for fiscal 1998 was $50.2 million as compared to net losses of
$360.4 million and $74.0 million for fiscal 1997 and 1996, respectively. We
recorded a net credit for restructuring charges of $10.3 million in fiscal 1998
as compared to restructuring expense for fiscal 1997 of $108.2 million. Net
accounts receivable increased at December 31, 1998 as compared to December 31,
1997, primarily as a result of an increase of $33.6 million in net revenues in
the fourth quarter of fiscal 1998 when compared to the same quarter in fiscal
1997.

11
<PAGE>
INVESTING CASH FLOWS. Net cash and cash equivalents used in investing
activities decreased by approximately $3.3 million for fiscal 1998 compared with
fiscal 1997. The decrease was due in large part to a reduction in capital
expenditures to $20.8 million in fiscal 1998 from $31.8 million in fiscal 1997
(net of cash proceeds from the disposal of land, property and equipment of $62.4
million). This decrease was offset by increased investment in fiscal 1998,
totaling $19.0 million, of excess cash generated from profitable operations.
Significant investing activities during the year also included additions to
software costs of $18.6 million.

FINANCING CASH FLOWS. Net cash and cash equivalents provided by financing
activities in fiscal 1998 and fiscal 1997 consist primarily of proceeds from the
sale of our common stock and from the issuance of our Series A-1 Preferred Stock
and Series B Preferred Stock.

Proceeds from the sale of our common stock represent stock options
exercised, purchases under our Employee Stock Purchase Plan and issuances of
convertible preferred stock by Cloudscape which were subsequently converted into
common stock prior to the Cloudscape Merger. The proceeds totaled
$26.3 million, $13.4 million and $25.8 million for fiscal 1998, 1997 and 1996,
respectively.

During fiscal 1998, we raised net proceeds of $32.9 million through the
exercise of warrants issued in conjunction with our Series A-1 Preferred Stock.
In February 1998, the Series A-1 Preferred Stockholders exercised warrants to
purchase 60,000 additional shares of Series A-1 Preferred at $250 per share for
net proceeds of $14.1 million. In November 1998, the Series A-1 Preferred
Stockholders exercised their remaining warrants in full to purchase 80,000
shares of Series A-1 Preferred, resulting in $18.8 million in net proceeds.
These warrants were originally issued in August 1997 in connection with the sale
of the 160,000 shares of Series A-1 Preferred, which resulted in net proceeds of
$37.6 million.

During fiscal 1998, 1997 and 1996, we received $11.4 million, $21.8 million
and $207.2 million, respectively, of advances from customers and financial
institutions. We may receive cash, either from the customer, or from a financial
institution to whom the customer payment streams due under software license
arrangements are sold, prior to the time the license fee is recognized as earned
revenue. If we fail to comply with the contractual terms of the specific license
agreement, we could be required to refund to the customer or the financial
institution the amount received. However, we do not believe the refunds of
amounts received, if any, would have a material effect on our results of
operations, financial position, or cash flows.

OTHER. During fiscal 1997, we assigned our leasehold interest and our
related obligations under an office space lease in Santa Clara, California to an
unrelated third party. The lease term was for fifteen years and minimum lease
payments amount to $96.0 million over the term. We remain contingently liable
for minimum lease payments under the terms of the assignment.

We have several active software development and service provider contracts
with third-party technology providers. These agreements contain financial
commitments by us of $12.4 million, $10.2 million, $7.3 million and $2.7 million
in fiscal 1999, 2000, 2001 and 2002, respectively.

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.

12
<PAGE>
RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

The following table and discussion compares the results of operations for
the nine-month periods ended September 30, 1999 and 1998.

<TABLE>
<CAPTION>
PERCENT OF
NET REVENUES
-----------------------
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
NET REVENUES
Licenses............................................ 50% 51%
Services............................................ 50 49
--- ---
100 100
COSTS AND EXPENSES
Cost of software distribution....................... 5 5
Cost of services.................................... 21 22
Sales and marketing................................. 37 38
Research and development............................ 19 21
General and administrative.......................... 9 10
Restructuring charges............................... -- (1)
--- ---
92 94
--- ---
Operating income...................................... 8 7
OTHER INCOME (EXPENSE)
Interest income..................................... 1 1
Interest expense.................................... (1) (1)
Litigation settlement expense....................... (16) --
Other, net.......................................... -- (1)
--- ---
INCOME (LOSS) BEFORE INCOME TAXES..................... (7) 6
Income taxes........................................ 2 --
--- ---
NET INCOME (LOSS)..................................... (9)% 5%
=== ===
</TABLE>

Our operating results for the nine-month period ended September 30, 1999
improved over the same period of the prior year. For the nine-month period ended
September 30, 1999, net revenue growth was 19% while costs and expenses
increased by only 17% when compared to the same period in 1998. As a percentage
of net revenues, most operating expense categories remained consistent for the
nine-month period ended September 30, 1999, with cost of services, sales and
marketing, research and development expenses and general and administrative
expenses showing a slight downward trend when compared to the corresponding
prior year period. Operating income for the first nine months of 1999 increased
62% over the corresponding period in 1998. Growth in revenues was realized in
all regions during the nine-month period ended September 30, 1999 as total sales
in Latin America, Asia/Pacific, Europe and North America increased by 33%, 20%,
19% and 17%, 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
OEMs, distributors and value added resellers (VAR's). For the nine-month period
ended September 30, 1999, license revenues increased 16% to $307.6 million from
$265.9 million for the same period in 1998.

13
<PAGE>
Each of our regions reported increased license revenues for the nine-month
period ended September 30, 1999 when compared to the same period in 1998, as
follows:

- Latin America license revenues increased to $29.0 million as compared to
$22.5 million, an increase of 29%

- Europe license revenues increased to $103.5 million as compared to
$86.9 million, an increase of 19%

- North America license revenues increased to $130.4 million as compared to
$115.2 million, an increase of 13%

- Asia Pacific license revenues increased to $44.6 million as compared to
$41.3 million, an increase of 8%

Revenues from the sale of Red Brick products partially contributed to the
increase in license revenues. In addition, the international economies have
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 $53.1 million and
$121.1 million had not been recognized as earned revenue as of September 30,
1999 and December 31, 1998, respectively. During the nine-month period ended
September 30, 1999, we received $5.2 million in customer advances and recognized
revenue from previously recorded customer advances of $64.4 million. Included in
the $64.4 million recognized were $53.0 million of licenses which were resold or
utilized by the reseller, $10.9 million related to contractual reductions in
customer advances and $0.5 million related to previously-deferred revenue for
solution sales which has now been recognized.

Management believes that the level of licenses sold through these resellers
is likely to continue, however revenue may not be sustained following full
utilization of the "advances from customers and financial institutions" because
there may be less incentive for resellers to sell our products.

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 September 30, 1999, we had reached structured
settlements with three resellers with remaining rights to resell a total of
$10.1 million of our products. In accordance with the settlements, the minimum
future reduction in customer advances totals $3.6 million and $6.5 million for
the quarter 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. During the nine-month period ended September 30, 1999,
service revenues increased $58.1 million, or 23%, to $312.9 million from
$254.7 million for the same period in 1998. Service revenues accounted for 50%
of net revenues for the nine-month period ended September 30, 1999, compared to
49% of net revenues for the nine-month period ended September 30, 1998.

14
<PAGE>
Maintenance revenues increased 30% to $235.3 million for the nine-month
period ended September 30, 1999 when compared to the same period in 1998. This
increase is 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.

Consulting and training revenues increased slightly to $77.5 million for the
nine-month period ended September 30, 1999 from $74.1 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 to $31.3 million for the nine-month period ended
September 30, 1999 from $26.7 million for the same period in 1998. As a
percentage of license revenues, cost of software distribution remained
consistent at 10% for the nine-month period ended September 30, 1999 and the
same period in 1998. Amortization of capitalized software remained relatively
flat at $13.9 million, or 5% of license revenues, for the nine-month period
ended September 30, 1999 compared to $15.8 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 nine-month period
ended September 30, 1999 increased by 16% when compared to the same period in
1998. This increase is primarily due to an increase of approximately 11% 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 18% in the nine-month period ended
September 30, 1999 when compared to the same period in 1998. This increase is in
line with the net revenue growth rates over the corresponding prior year period
as sales and marketing expenses have remained consistent at 37% and 38% of net
revenues for the nine-month periods ended September 30, 1999 and 1998,
respectively. The increase in absolute dollars in 1999 was due primarily to
increased commissions and selling expenses, which resulted from the growth in
net revenues. Also, during 1999 we have 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 9% to
$120.5 million for the nine-month period ended September 30, 1999 when compared
to the same period in 1998. This increase in research and development expenses
in absolute dollars when compared to the corresponding period in 1998 is
attributable primarily to amortization of intangible assets resulting from the
Red Brick acquisition and an increase in headcount of approximately 9%. As a
percentage of net revenues, research and development expenses decreased slightly
to 19% for the nine-month period ended September 30, 1999, a level 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. For the nine-month periods ended
September 30, 1999 and 1998, general and administrative expenses have remained
consistent at 9% and 10% of net revenues, respectively.

15
<PAGE>
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. 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 nine-month periods ended September 30, 1999 and 1998, adjustments
of $0.6 million and $7.3 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 $2.3 million remained as a liability in our financial statements as of
September 30, 1999, all of which related to facility charges.

OTHER INCOME (EXPENSE)

INTEREST INCOME. Interest income for the nine-month period ended
September 30, 1999 increased to $8.0 million from $6.6 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 $3.3 million for the
nine-month period ended September 30, 1999 from $4.6 million for the same period
in 1998 due primarily to a decline in 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.

OTHER INCOME (EXPENSE), NET. Other income (expense), net increased from a
net expense of approximately $2.4 million for the nine-month period ended
September 30, 1998 to other income, net, of $0.2 million for the same period in
1999. This increase was due primarily to gains on the sales of securities and
lower net foreign currency losses during the 1999 period when compared to the
same period in 1998.

LITIGATION SETTLEMENT EXPENSE. During the nine-month period ended September
30, 1999 we incurred a 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

For the nine-month periods ended September 30, 1999 and 1998, income tax
expense resulted from withholding taxes and taxable earnings in certain foreign
jurisdictions where we have fully utilized our net operating loss carryforwards.

16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1999 1998
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash, cash equivalents, and short-term investments.......... $215.9 $163.1
Working capital (deficit)................................... 111.8 (8.6)
Cash and cash equivalents provided by (used for)
operations................................................ 1.8 (28.5)
Cash and cash equivalents used for investment activities.... (60.9) (27.9)
Cash and cash equivalents provided by financing
activities................................................ 12.5 44.2
</TABLE>

OPERATING CASH FLOWS. Cash and cash equivalents provided by operations
totaled $1.8 million for the nine-month period ended September 30, 1999 compared
to cash and cash equivalents used by operations of $28.5 million for the same
period in 1998. This increase in operating cash inflows was due primarily to
improved operating profitability in 1999.

INVESTING CASH FLOWS. Net cash and cash equivalents used for investment
activities increased by approximately $33.0 million during the nine-month period
ended September 30, 1999 when compared to the same period in 1998. This increase
was due primarily to a net increase of approximately $28.3 million in our
investment in available-for-sale securities of excess cash generated from
operating income during the first nine months of 1999 when compared to the same
period in 1998. Other significant changes in investing activities during the
first nine months of 1999 compared to the corresponding period in 1998 include
an increase in capital expenditures of $3.9 million, an increase in the
capitalization of software development costs of $3.8 million and a net decrease
in proceeds from the sale of strategic investments and marketable securities of
$2.8 million.

FINANCING CASH FLOWS. The $31.7 million decrease in cash and cash
equivalents provided by financing activities during the first nine months of
1999 when compared to the same period in 1998 was due primarily to (i) 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; and (ii) net proceeds of approximately $10.0 million received from
the issuance of convertible preferred stock by Cloudscape, which was
subsequently converted into common stock prior to the Cloudscape Merger. Net
cash and cash equivalents provided by financing activities during the nine-month
period ended September 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 capital leases and
payments for structured settlements with resellers.

QUARTERLY OPERATING RESULTS

The quarterly operating results for 1999, 1998 and 1997 for Informix and
Cloudscape are combined as follows:

1999 Quarterly Periods

<TABLE>
<CAPTION>
Q1'99 Q2'99 Q3'99
--------------- --------------- ---------------
<S> <C> <C> <C> <C>
Informix................ March, 1999 June, 1999 September, 1999
Cloudscape.............. March, 1999 June, 1999 September, 1999
</TABLE>

17
<PAGE>
1998 Quarterly Periods

<TABLE>
<CAPTION>
Q1'98 Q2'98 Q3'98 Q4'98
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Informix................ March, 1998 June, 1998 September, 1998 December, 1998
Cloudscape.............. June, 1998 September, 1998 December, 1998 March, 1999
</TABLE>

1997 Quarterly Periods

<TABLE>
<CAPTION>
Q1'97 Q2'97 Q3'97 Q4'97
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Informix................ March, 1997 June, 1997 September, 1997 December, 1997
Cloudscape.............. June, 1997 September, 1997 December, 1997 March, 1998
</TABLE>

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Nine-month period ended September 30, 1999
Net revenues................................... $ 196,944 $ 207,208 $ 216,272
Gross profit................................... 141,857 154,146 161,483
Net income (loss).............................. 5,526 (81,453) 21,993
Preferred stock dividend....................... (303) (279) (247)
Net income (loss) applicable to common
stockholders................................. 5,223 (81,732) 21,746
========= ========= =========
Net income (loss) per common share:
Basic.......................................... $ 0.03 $ (0.42) $ 0.11
========= ========= =========
Diluted........................................ $ 0.03 $ (0.42) $ 0.10
========= ========= =========
Year ended December 31, 1998
Net revenues................................... $ 161,019 $ 174,284 $ 185,284 $ 214,919
Gross profit................................... 113,586 128,355 138,080 164,092
Net income..................................... $ 118 $ 10,593 $ 16,919 $ 22,554
Preferred stock dividend....................... (603) (624) (589) (1,662)
Value assigned to warrants..................... (1,594) (388) -- --
--------- --------- --------- ---------
Net income (loss) applicable to common
stockholders................................. $ (2,079) $ 9,581 $ 16,330 $ 20,892
========= ========= ========= =========
Net income (loss) per common share:
Basic.......................................... $ (0.01) $ 0.06 $ 0.10 $ 0.12
========= ========= ========= =========
Diluted........................................ $ (0.01) $ 0.05 $ 0.09 $ 0.11
========= ========= ========= =========
Year ended December 31, 1997
Net revenues................................... $ 149,902 $ 182,527 $ 150,184 $ 181,279
Gross profit................................... 79,616 124,042 97,898 132,393
Net income (loss).............................. $(144,610) $(111,931) $(111,479) $ 7,632
Preferred stock dividend....................... -- -- -- (301)
Value assigned to warrants..................... -- -- -- (1,601)
--------- --------- --------- ---------
Net income (loss) applicable to common
stockholders................................. $(144,610) $(111,931) $(111,479) $ 5,730
========= ========= ========= =========
Net income (loss) per common share:
Basic.......................................... $ (0.96) $ (0.74) $ (0.73) $ 0.04
========= ========= ========= =========
Diluted........................................ $ (0.96) $ (0.74) $ (0.73) $ 0.03
========= ========= ========= =========
</TABLE>

18
<PAGE>
In the first quarter of fiscal 1997, we experienced a substantial shortfall
in license revenues compared to forecasts, resulting in a substantial loss for
the quarter. The shortfall in revenue was due to slow growth in demand for RDBMS
products as well as our inability to close a number of sales transactions that
management anticipated would close by the end of the quarter, especially in
Europe. As a result of the shortfall in license revenues for this quarter, we,
in the second and third quarters of fiscal 1997, initiated two internal
restructurings of our operations intended to reduce operating expenses and
improve our financial condition. These restructurings included reductions in
headcount and leased facilities and the downsizing, elimination or conversion
into solutions labs of our planned Information Superstores. Costs associated
with the restructurings totaled approximately $108.2 million and had a material
adverse impact on our results of operations for fiscal 1997. See "Restructuring
Charges." Additionally, during fiscal 1997, we performed a major restatement for
all of the periods included in the three years ended December 31, 1996, as well
as for the quarter ended March 31, 1997. At that time, our administrative
processes were weak which contributed to the existence of significant weaknesses
in our internal controls. Following these events, customers were concerned about
our viability and, accordingly, our management was concerned about whether
customers would honor their financial obligations to us.

The restructuring activities and the restatement of financial results
impacted the environment in which we operated, and, accordingly, impacted the
estimates and assumptions used by management in the preparation of our financial
statements. As of December 31, 1997, we made certain estimates including
allowances for uncollectable accounts receivable based on the probability of
collections, estimates for product returns associated with ongoing customer
uncertainty about our financial condition and contingencies associated with
continuing issues related to fiscal 1997. These estimates, in the ordinary
course of business, change as a result of management actions and environmental
changes.

During the last quarter of fiscal 1997 and the first two quarters of fiscal
1998, we took a number of actions to help restore customer confidence regarding
our ongoing viability. These actions included: (i) generating a total of $63.3
million from an offering of Series B Preferred Stock and the exercise of
warrants related to outstanding Series A-1 Preferred Stock and increasing the
balance of cash, cash equivalents and short term investments; (ii) visits to key
customers by senior management to reinforce our customers' confidence in us,
(iii) signing significant new contracts with existing customers and winning new
customers in a variety of application areas including data warehousing and
Web/content management; (iv) demonstrating continued ability to generate a
meaningful revenue stream; (v) decreasing employee turnover and increasing the
ability to attract new employees and senior management talent; and
(vi) introducing significant new products and increasing research and
development funding. All of these factors contributed to customers honoring
their financial obligations to us, while reducing the probability of product
return and collections problems.

Additionally, during the first two quarters of fiscal 1998, we took certain
actions and made improvements in the quality of our accounts receivable
balances. The actions taken included: (i) centralizing European credit and
collections for most countries and outsourcing this function to a professional
credit and collections firm; (ii) improving our Europe region's accounts
receivable aging from a balance of $8.5 million outstanding greater than 90 days
as of December 31, 1997 to a balance of $3.9 million outstanding greater than 90
days as of June 30, 1998; and (iii) refining our methodology for estimating
general uncollectible accounts receivable over and above specific accounts
receivable reserves.

The improvement in both our financial condition and the credit and
collections processes which resulted from our actions led to a decrease of risk
such that reserves for product return and bad debts were reduced by $1.7 million
and $5.0 million in the first and second quarters of fiscal 1998, respectively.

As of December 31, 1997, our accrued liabilities included accruals for
certain claims against us. During the first quarter of fiscal 1998, our lawyers
determined that there was no merit to a specific claim for which we had recorded
a liability of $1.9 million. Accordingly, we reversed this $1.9 million accrual
during the first quarter of fiscal 1998. In addition, we reduced an accrued
liability related to another

19
<PAGE>
specific claim by $2.0 million and $0.8 million during the second and third
quarters of fiscal 1998, respectively, based on a legal opinion and a settlement
offer.

We recorded restructuring charges of $59.6 million and $49.7 million in the
second and third quarters of fiscal 1997, respectively. The total restructuring
expense decreased by $1.2 million during the fourth quarter of fiscal 1997
primarily due to adjusting the original estimate of the loss incurred on the
sale of land to the actual loss. We recorded restructuring-related adjustments
to decrease restructuring expense by $3.3 million, $1.4 million, $2.6 million
and $3.0 million in the first, second, third, and fourth quarters of fiscal
1998, respectively, primarily due to adjusting the estimated severance and
facility charges to actual costs incurred.

In the first quarter of fiscal 1997, we recorded a charge of $30.5 million
to write down the carrying values of certain of our Japanese subsidiary's
long-lived assets to their fair values. During the same quarter, we also
recorded a charge of $14.7 million to write down the carrying value of
capitalized software development costs for certain products to their net
realizable values. In connection with our acquisition of Red Brick in
December 1998, we recorded a charge to operations in the fourth quarter of
fiscal 1998 of $2.6 million for in-process research and development which had
not yet reached technological feasibility and had no alternative future uses.

We believe the actions taken by management improved our operating
environment and helped restore customer confidence in our company and its
products.

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 three 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

The program has been substantially completed as of 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

20
<PAGE>
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)

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 significant progress
in completing the Repair or Replace phase for each of the four sections up
through the end of the third quarter 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 was drafted 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.

21
<PAGE>
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. The Year 2000 Program Office has not included the recent
Cloudscape acquisition into the Informix Year 2000 program plan to date. Work
will proceed during the fourth quarter of 1999.

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 September 1999, and plan to complete remediation
of all mission critical IS Operations components by November 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, completed draft contingency plans by September 1999 and
plan to continue to refine and rehearse as necessary through the end of
the year.

- 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 September 1999 towards making all important and
non-important IS applications systems Year 2000 compliant. We plan to test
and put back into production the two remaining important systems by
November 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, completed
draft contingency plans by September 1999 and plan to continue to refine
and rehearse as necessary through the end of the year.

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, which were drafted by the end of September 1999.
Follow-up reviews with each of our critical suppliers are scheduled through the
remainder of 1999 to ascertain alternative communication channels and emergency
procedures in the event of widespread outages.

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 November
1999. We have also completed the preparation in our key business areas,
including Finance,

22
<PAGE>
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 $3.5 million. The
total amount expended on the project through September 30, 1999 was
approximately $2.0 million. The estimated future cost of completing the Year
2000 project is estimated to be approximately $1.5 million. We estimate that the
remaining amount will be spent as follows:

- $0.5 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 $0.1 million for capital expenditures to repair or replace
non-IS equipment, including but not limited to security systems and backup
generator supplies

- $0.9 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

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

23
<PAGE>
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.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
("AICPA") 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 nine month period ended
September 30, 1999.

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 is effective for fiscal years beginning after June 15,
1999. Earlier application of SFAS 133 is encouraged but should not be applied
retroactively to financial statements of prior periods. We are 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 clarified the specification of what was 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 us in fiscal year 2000. The adoption of this statement is not expected
to have a material impact on our operating results, financial position or cash
flows.

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

24
<PAGE>
securities brokers and banks. The table below presents the amounts and related
weighted interest rates of our investment portfolio at December 31, 1998:

<TABLE>
<CAPTION>
AVERAGE
INTEREST RATE COST FAIR VALUE
------------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash equivalents(1)
Fixed rate.................................. 5.18% $91,401 $91,569
Variable rate............................... 4.92% 1,289 1,289
Short-term investments(1)
Fixed rate.................................. 5.42% 41,032 41,093
Variable rate............................... 0.00% -- --
Long-term investments(1)
Fixed rate.................................. 5.24% 6,033 6,009
Variable rate............................... 0.00% -- --
</TABLE>

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

(1) See definition in Note 1 to our Consolidated Financial Statements.

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. We
attempt 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. These forward foreign
currency exchange contracts do not qualify as hedges and, therefore, are marked
to market, accounting for a significant portion of our net foreign currency
losses of $4.8 million in 1998. These losses are primarily offset by gains
realized in cost of software distribution resulting from these foreign currency
movements.

25
<PAGE>
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 December 31, 1998 and
the forward rate, plus the unamortized premium or discount. All contracts mature
within twelve months.

FORWARD CONTRACTS

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
AT DECEMBER 31, 1998 CONTRACT AMOUNT CONTRACT RATE FAIR VALUE
- -------------------- --------------- ---------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Forward currency to be sold under contract:
Japanese Yen.................................... $11,719 118.18 $(262)
Deutsche Mark................................... 8,092 1.66 39
Korean Won...................................... 5,250 1,238.00 (119)
Singapore Dollar................................ 4,264 1.64 45
British Pound................................... 3,322 1.66 (30)
Australian Dollar............................... 2,756 0.61 (2)
Netherland Guilder.............................. 2,087 1.88 7
Swiss Franc..................................... 2,010 1.35 21
Brazilian Real.................................. 1,382 1.45 (273)
Other (individually less than $1 million)....... 2,926 * (36)
------- -----
Total............................................. $43,808 $(610)
======= =====
Forward currency to be purchased under contract:
British Pound................................... $42,576 1.67 $ 81
French Franc.................................... 3,046 5.58 (17)
Swedish Krona................................... 1,493 7.96 (23)
Danish Krone.................................... 1,316 6.35 (3)
Other (individually less than $1 million)....... 1,692 * 24
------- -----
Total............................................. $50,123 $ 62
======= =====
Grand Total....................................... $93,931 $(548)
======= =====
</TABLE>

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

* Not meaningful

26
<PAGE>
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INFORMIX

Report of KPMG LLP, Independent Auditors.................... F-2
Report of Ernst & Young LLP, Independent Auditors........... F-3
Supplemental Consolidated Balance Sheets as of December 31,
1998 and 1997............................................. F-4
Supplemental Consolidated Statements of Operations for the
Years ended December 31, 1998, 1997 and 1996.............. F-5
Supplemental Consolidated Statements of Cash Flows for the
Years ended December 31, 1998, 1997 and 1996.............. F-6
Supplemental Consolidated Statements of Stockholders' Equity
for the Years ended December 31, 1998, 1997 and 1996...... F-7
Notes to Supplemental Consolidated Financial Statements..... F-8
Supplemental Unaudited Condensed Consolidated Balance Sheets
as of September 30, 1999 and December 31, 1998............ F-42
Supplemental Unaudited Condensed Consolidated Statements of
Operations for the nine-month periods ended September 30,
1999 and 1998............................................. F-43
Supplemental Unaudited Condensed Consolidated Statements of
Cash Flows for the nine-month periods ended September 30,
1999 and 1998............................................. F-44
Notes to Supplemental Unaudited Condensed Consolidated
Financial Statements...................................... F-45
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Informix Corporation:

We have audited the accompanying supplemental consolidated balance sheet of
Informix Corporation and subsidiaries as of December 31, 1998, and the related
supplemental consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. Our audit also included the financial
statement schedule included herein as of and for the year ended December 31,
1998. These supplemental consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental consolidated
financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

The supplemental consolidated financial statements and financial statement
schedule give retroactive effect to the merger of Informix Corporation and
Cloudscape, Inc. on October 8, 1999, which has been accounted for as a pooling
of interests as described in Note 11 to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements and financial statement schedule do not extend
through the date of consummation. However, they will become the historical
consolidated financial statements and financial statement schedule of Informix
Corporation and subsidiaries after financial statements covering the date of
consummation of the business combination are issued.

In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Informix Corporation and subsidiaries as of December 31, 1998, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles applicable after financial
statements are issued for a period which includes the date of consummation of
the business combination. Also, in our opinion, the related financial statement
schedule as of and for the year ended December 31, 1998, when considered in
relation to the basic supplemental consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

/s/ KPMG LLP

Mountain View, California

November 5, 1999

F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Informix Corporation

We have audited the supplemental consolidated balance sheet of Informix
Corporation (formed as a result of the consolidation of Informix Corporation and
Cloudscape, Inc.) as of December 31, 1997 and the related supplemental
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1997. The supplemental consolidated
financial statements give retroactive effect to the merger of Informix
Corporation and Cloudscape, Inc. on October 8, 1999, which has been accounted
for using the pooling of interests method as described in the notes to the
supplemental consolidated financial statements. Our audits also included the
supplemental financial statement schedule for the two years ended December 31,
1997. These supplemental financial statements and schedule are the
responsibility of the management of Informix Corporation. Our responsibility is
to express an opinion on these supplemental financial statements and schedule
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the supplemental financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Informix Corporation at December 31, 1997, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997, after giving retroactive effect to the merger of Informix
Corporation and Cloudscape, Inc., as described in the notes to the supplemental
consolidated financial statements, in conformity with generally accepted
accounting principles. Also, in our opinion, the related supplemental financial
schedule, when considered in relation to the basic supplemental financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ Ernst & Young LLP

San Jose, California
March 2, 1998

F-3
<PAGE>
INFORMIX CORPORATION

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 185,459 $ 141,559
Short-term investments.................................... 41,093 16,069
Accounts receivable, less allowance for doubtful accounts
of $15,089 in 1998 and $27,104 in 1997.................. 187,342 142,055
Recoverable income taxes.................................. 3,255 --
Deferred taxes............................................ -- 12,249
Other current assets...................................... 20,373 26,264
--------- ---------
Total current assets........................................ 437,522 338,196
--------- ---------
PROPERTY AND EQUIPMENT, net................................. 75,845 96,425
SOFTWARE COSTS, less accumulated amortization of $32,219 in
1998 and $22,786 in 1997.................................. 38,006 40,854
DEFERRED TAXES, including income tax refunds................ -- 56,345
LONG-TERM INVESTMENTS....................................... 22,191 12,458
INTANGIBLE ASSETS, net...................................... 41,482 8,277
OTHER ASSETS................................................ 7,019 13,466
--------- ---------
Total Assets................................................ $ 622,065 $ 566,021
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 29,900 $ 36,901
Accrued expenses.......................................... 59,558 64,538
Accrued employee compensation............................. 50,649 49,154
Income taxes payable...................................... -- 3,031
Deferred revenue.......................................... 132,390 100,828
Advances from customers and financial institutions........ 121,077 180,048
Accrued restructuring costs............................... 5,813 26,597
Other current liabilities................................. 6,875 15,902
--------- ---------
Total current liabilities................................... 406,262 476,999
--------- ---------
OTHER NON-CURRENT LIABILITIES............................... 3,759 6,544
DEFERRED TAXES.............................................. -- 21,716
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share, 5,000,000
shares authorized
Series A-1 convertible preferred stock, 300,000 shares
issued; none and 160,000 outstanding in 1998 and 1997,
respectively........................................... -- 2
Series B convertible preferred stock, 50,000 shares
issued; 23,300 and 50,000 outstanding in 1998 and 1997,
respectively; aggregate liquidation preference of
$25,927................................................ -- 1
Convertible preferred stock of Cloudscape, Inc.,
6,343,000 and 3,535,000 issued and outstanding in 1998
and 1997, respectively; aggregate liquidation
preference of $15,735 and $5,685 in 1998 and 1997,
respectively........................................... 63 35
Common stock, par value $.01 per share, 500,000,000 shares
authorized; 191,244,000 and 154,496,000 shares issued
and outstanding in 1998 and 1997, respectively.......... 1,913 1,545
Additional paid-in capital................................ 445,352 353,200
Accumulated deficit....................................... (231,934) (282,118)
Accumulated other comprehensive loss...................... (3,350) (11,903)
--------- ---------
Total stockholders' equity.................................. 212,044 60,762
--------- ---------
Total Liabilities and Stockholders' Equity.................. $ 622,065 $ 566,021
========= =========
</TABLE>

See Notes to Supplemental Consolidated Financial Statements.

F-4
<PAGE>
INFORMIX CORPORATION

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES
Licenses............................................... $ 383,947 $ 378,164 $ 502,730
Services............................................... 351,559 285,728 231,810
---------- ---------- ----------
735,506 663,892 734,540
COSTS AND EXPENSES
Cost of software distribution.......................... 35,446 63,027 46,786
Cost of services....................................... 155,947 166,916 144,850
Sales and marketing.................................... 271,881 418,139 413,690
Research and development............................... 149,591 141,455 120,567
General and administrative............................. 77,010 88,087 64,520
Write-off of goodwill and other long-term assets....... -- 30,473 --
Write-off of acquired research and development......... 2,600 7,000 --
Restructuring charges.................................. (10,255) 108,248 --
Expenses related to Illustra merger.................... -- -- 5,914
---------- ---------- ----------
682,220 1,023,345 796,327
---------- ---------- ----------
Operating income (loss)................................ 53,286 (359,453) (61,787)
OTHER INCOME (EXPENSE)
Interest income........................................ 11,728 5,813 9,875
Interest expense....................................... (5,849) (9,405) (12,475)
Other, net............................................. (4,581) 10,474 2,899
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES...................... 54,584 (352,571) (61,488)
Income taxes........................................... 4,400 7,817 12,531
---------- ---------- ----------
NET INCOME (LOSS)...................................... 50,184 (360,388) (74,019)
Preferred stock dividend............................... (3,478) (301) --
Value assigned to warrants............................. (1,982) (1,601) --
---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS.... $ 44,724 $ (362,290) $ (74,019)
========== ========== ==========
NET INCOME (LOSS) PER COMMON SHARE
Basic.................................................. $ 0.26 $ (2.37) $ (0.49)
========== ========== ==========
Diluted................................................ $ 0.25 $ (2.37) $ (0.49)
========== ========== ==========
SHARES USED IN PER SHARE CALCULATIONS
Basic.................................................. 169,581 152,543 149,525
========== ========== ==========
Diluted................................................ 182,400 152,543 149,525
========== ========== ==========
</TABLE>

See Notes to Supplemental Consolidated Financial Statements.

F-5
<PAGE>
INFORMIX CORPORATION

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $ 50,184 $(360,388) $(74,019)
Adjustments to reconcile net income (loss) to cash and cash
equivalents provided by (used in) operating activities:
License fees received in advance.......................... (66,069) (64,797) (58,206)
Depreciation and amortization............................. 46,813 65,694 47,213
Amortization of capitalized software...................... 20,699 21,437 14,626
Write-off of capitalized software......................... 771 14,749 --
Write-off of long term assets............................. -- 6,799 --
Write-off of intangibles.................................. -- 20,033 --
Write-off of acquired research and development............ 2,600 7,000 --
Foreign currency transaction losses (gains)............... 2,641 3,243 (5,349)
(Gain) loss on sales of strategic investments............. 500 (5,007) (3,856)
Loss on disposal of property and equipment................ 1,921 10,815 2,393
Deferred tax expense...................................... -- (328) (3,965)
Provisions for losses on accounts receivable.............. (4,793) 19,929 14,983
Restructuring charges..................................... (10,255) 77,196 --
Stock-based employee compensation......................... 941 7,509 --
Changes in operating assets and liabilities:
Accounts receivable..................................... (38,399) 42,596 (45,426)
Other current assets.................................... 52,798 40,516 88
Accounts payable and accrued expenses................... (62,642) (58,315) 52,271
Deferred maintenance revenue............................ 23,648 3,618 29,590
-------- --------- --------
Net cash and cash equivalents provided by (used in)
operating activities...................................... 21,358 (147,701) (29,657)
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments of excess cash:
Purchases of available-for-sale securities................ (53,054) (35,255) (152,179)
Maturities of available-for-sale securities............... 9,725 14,468 126,137
Sales of available-for-sale securities.................... 24,300 45,957 83,696
Purchases of strategic investments.......................... (7,009) (3,250) (12,737)
Proceeds from sales of strategic investments................ 1,500 10,454 7,299
Purchases of land, property and equipment................... (20,811) (94,211) (148,319)
Proceeds from disposal of land, property and equipment...... 864 62,371 1,929
Additions to software costs................................. (18,620) (20,776) (32,381)
Business combinations, net of cash acquired................. 1,834 (9,749) (4,340)
Other....................................................... 1,111 (33,511) (14,595)
-------- --------- --------
Net cash and cash equivalents used in investing
activities................................................ (60,160) (63,502) (145,490)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from customers and financial institutions.......... 11,402 21,787 207,218
Proceeds from issuance of common stock, net................. 16,254 8,250 25,361
Proceeds from issuance of preferred stock, net.............. 42,919 92,755 482
Principal payments on capital leases........................ (4,409) (3,388) (1,025)
Net borrowings under line of credit......................... 436 298 35
Acquisition of common stock................................. -- -- (2,388)
Reissuance of treasury stock................................ -- -- 578
-------- --------- --------
Net cash and cash equivalents provided by financing
activities................................................ 66,602 119,702 230,261
-------- --------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... 16,100 5,497 8,144
-------- --------- --------
Increase (decrease) in cash and cash equivalents............ 43,900 (86,004) 63,258
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 141,559 227,563 164,305
-------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $185,459 $ 141,559 $227,563
======== ========= ========
</TABLE>

See Notes to Supplemental Consolidated Financial Statements.

F-6
<PAGE>
INFORMIX CORPORATION
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------------------------------------
SERIES A-1 SERIES B CLOUDSCAPE
------------------- ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(In thousands) -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995................................ -- -- -- -- -- --
Comprehensive loss
Net loss..................................................
Other comprehensive loss..................................
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1)........................
Foreign currency translation adjustments................
Other comprehensive loss..................................
Comprehensive loss..........................................
Issuance of preferred stock of Cloudscape................... 654 7
Issuance of founders' common stock of Cloudscape............
Exercise of stock options...................................
Sale of stock to employees under employee stock purchase
plan......................................................
Acquisition of treasury stock...............................
Reissuance of treasury stock................................
Tax benefits related to stock options.......................
---- -- --- -- ----- --
Balances at December 31, 1996............................... -- -- -- -- 654 7
---- -- --- -- ----- --
Comprehensive loss
Net loss..................................................
Other comprehensive loss
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)........................
Foreign currency translation adjustments................
Other comprehensive loss..................................
Comprehensive loss..........................................
Issuance of preferred stock of Cloudscape................... 2,881 28
Exercise of stock options...................................
Sale of stock to employees under employee stock purchase
plan......................................................
Stock-based compensation expense resulting from stock
options...................................................
Issuance of Series A-1 convertible preferred stock and
warrants, net............................................. 160 2
Issuance of Series B convertible preferred stock and
warrants, net............................................. 50 1
Common stock issued for services rendered...................
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock...............................
---- -- --- -- ----- --
Balance at December 31, 1997................................ 160 2 50 1 3,535 35
---- -- --- -- ----- --
Comprehensive income
Net income................................................
Other comprehensive income
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)........................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Issuance of preferred stock of Cloudscape................... 2,808 28
Exercise of stock options...................................
Common stock issued for services rendered...................
Sale of stock to employees under employee stock purchase
plan......................................................
Stock-based compensation expense resulting from stock
options...................................................
Exercise of Series A-1 convertible preferred stock warrants,
net....................................................... 140 1
Conversion of Series A-1 to common stock.................... (300) (3)
Conversion of Series B to common stock...................... (27) (1)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock...............................
Additional Series B dividend................................
Acquisition of Red Brick....................................
---- -- --- -- ----- --
Balance at December 31, 1998................................ -- -- 23 -- 6,343 63
==== == === == ===== ==
- ----------------------------------------
(1) Disclosure of reclassification amount for the years ended:

COMMON STOCK ADDITIONAL TREASURY STOCK
------------------- PAID-IN ------------------- RETAINED
SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS
(In thousands) -------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995................................ 147,984 1,480 204,448 -- -- $154,099
Comprehensive loss
Net loss.................................................. (74,019)
Other comprehensive loss..................................
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1)........................
Foreign currency translation adjustments................

Other comprehensive loss..................................

Comprehensive loss..........................................

Issuance of preferred stock of Cloudscape................... 475
Issuance of founders' common stock of Cloudscape............ 1,710 17 (13)
Exercise of stock options................................... 2,190 22 13,344
Sale of stock to employees under employee stock purchase
plan...................................................... 616 6 10,986
Acquisition of treasury stock............................... (100) (2,388)
Reissuance of treasury stock................................ 100 2,388 (1,810)
Tax benefits related to stock options....................... 14,787
------- ------- ------- ---- ------ --------
Balances at December 31, 1996............................... 152,500 1,525 244,027 -- -- 78,270
------- ------- ------- ---- ------ --------
Comprehensive loss
Net loss.................................................. (360,388)
Other comprehensive loss
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)........................
Foreign currency translation adjustments................

Other comprehensive loss..................................

Comprehensive loss..........................................

Issuance of preferred stock of Cloudscape................... 5,127
Exercise of stock options................................... 1,279 12 3,585
Sale of stock to employees under employee stock purchase
plan...................................................... 573 6 5,659
Stock-based compensation expense resulting from stock
options................................................... 7,501
Issuance of Series A-1 convertible preferred stock and
warrants, net............................................. 37,598
Issuance of Series B convertible preferred stock and
warrants, net............................................. 49,196
Common stock issued for services rendered................... 144 2 808
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (301)
------- ------- ------- ---- ------ --------
Balance at December 31, 1997................................ 154,496 1,545 353,200 -- -- (282,118)
------- ------- ------- ---- ------ --------
Comprehensive income
Net income................................................ 50,184
Other comprehensive income
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)........................
Foreign currency translation adjustments................

Other comprehensive income................................

Comprehensive income........................................

Issuance of preferred stock of Cloudscape................... 9,991
Exercise of stock options................................... 3,614 36 8,455
Common stock issued for services rendered................... 46 1 14
Sale of stock to employees under employee stock purchase
plan...................................................... 1,613 16 7,754
Stock-based compensation expense resulting from stock
options................................................... 915
Exercise of Series A-1 convertible preferred stock warrants,
net....................................................... 32,899
Conversion of Series A-1 to common stock.................... 17,413 174 (171)
Conversion of Series B to common stock...................... 6,471 65 (65)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (2,178)
Additional Series B dividend................................ (1,300)
Acquisition of Red Brick.................................... 7,591 76 35,838
------- ------- ------- ---- ------ --------
Balance at December 31, 1998................................ 191,244 1,913 445,352 -- -- (231,934)
======= ======= ======= ==== ====== ========
- ----------------------------------------
(1) Disclosure of reclassification amount for the years ende

ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
INCOME (LOSS) INCOME (LOSS) TOTALS
(In thousands) -------------- -------------- --------
<S> <C> <C> <C>
Balance at December 31, 1995................................ (2,279) 357,748
Comprehensive loss
Net loss.................................................. (74,019) (74,019)
Other comprehensive loss..................................
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1)........................ 7,626 7,626
Foreign currency translation adjustments................ (3,838) (3,838)
--------
Other comprehensive loss.................................. 3,788 3,788
--------
Comprehensive loss.......................................... (70,231)
========
Issuance of preferred stock of Cloudscape................... 482
Issuance of founders' common stock of Cloudscape............ 4
Exercise of stock options................................... 13,366
Sale of stock to employees under employee stock purchase
plan...................................................... 10,992
Acquisition of treasury stock............................... (2,388)
Reissuance of treasury stock................................ 578
Tax benefits related to stock options....................... 14,787
------- --------
Balances at December 31, 1996............................... 1,509 325,338
------- --------
Comprehensive loss
Net loss.................................................. (360,388) (360,388)
Other comprehensive loss
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)........................ (12,457) (12,457)
Foreign currency translation adjustments................ (955) (955)
--------
Other comprehensive loss.................................. (13,412) (13,412)
--------
Comprehensive loss.......................................... (373,800)
========
Issuance of preferred stock of Cloudscape................... 5,155
Exercise of stock options................................... 3,597
Sale of stock to employees under employee stock purchase
plan...................................................... 5,665
Stock-based compensation expense resulting from stock
options................................................... 7,501
Issuance of Series A-1 convertible preferred stock and
warrants, net............................................. 37,600
Issuance of Series B convertible preferred stock and
warrants, net............................................. 49,197
Common stock issued for services rendered................... 810
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (301)
------- --------
Balance at December 31, 1997................................ (11,903) 60,762
------- --------
Comprehensive income
Net income................................................ 50,184 50,184
Other comprehensive income
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)........................ 5,202 5,202
Foreign currency translation adjustments................ 3,351 3,351
--------
Other comprehensive income................................ 8,553 8,553
--------
Comprehensive income........................................ 58,737
========
Issuance of preferred stock of Cloudscape................... 10,019
Exercise of stock options................................... 8,491
Common stock issued for services rendered................... 15
Sale of stock to employees under employee stock purchase
plan...................................................... 7,770
Stock-based compensation expense resulting from stock
options................................................... 915
Exercise of Series A-1 convertible preferred stock warrants,
net....................................................... 32,900
Conversion of Series A-1 to common stock.................... --
Conversion of Series B to common stock...................... (1)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (2,178)
Additional Series B dividend................................ (1,300)
Acquisition of Red Brick.................................... 35,914
------- --------
Balance at December 31, 1998................................ (3,350) 212,044
======= ========
- ----------------------------------------
(1) Disclosure of reclassification amount for the years ende
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net unrealized gain (loss) on available-for-sale securities
arising during period..................................... $5,202 $ (3,599) $ 9,006
Less: reclassification adjustment for net gains included in
net income (loss)......................................... -- (8,858) (1,380)
------ -------- -------
Net unrealized gain (loss) on available-for-sale
securities................................................ $5,202 $(12,457) $ 7,626
====== ======== =======

<S> <C>
Net unrealized gain (loss) on available-for-sale securities
arising during period.....................................
Less: reclassification adjustment for net gains included in
net income (loss).........................................
Net unrealized gain (loss) on available-for-sale
securities................................................
</TABLE>

See Notes to Supplemental Consolidated Financial Statements.

F-7
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS. The Company is a leading multinational
supplier of information management software and solutions to governments and
enterprises worldwide. The Company designs, develops, manufactures, markets and
supports relational database management systems, connectivity interfaces and
gateways and graphical and character-based application development tools for
building database applications that allow customers to access, retrieve and
manipulate business data. The Company also offers complete solutions, which
include its database management software, its own and third party software and
consulting services to help customers design and rapidly deploy data warehousing
(decision support), web-based enterprise repository and electronic commerce
applications.

The principal geographic markets for the Company's products are North
America, Europe, Asia/ Pacific, and Latin America. Customers include businesses
ranging from small corporations to Fortune 1000 companies, principally in the
manufacturing, financial services, telecommunications, media, retail/wholesale,
hospitality, and government services sectors.

BASIS OF PRESENTATION. The supplemental consolidated financial statements
have been prepared to give retroactive effect to the merger with Cloudscape,
Inc. ("Cloudscape") on October 8, 1999. The supplemental consolidated financial
statements have been restated for all periods presented as if Cloudscape and the
Company had always been combined. Generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling-of-interests method in financial statements that do not include the
date of consummation. These supplemental financial statements do not extend
through the date of consummation; however, they will become the historical
consolidated financial statements of the Company after financial statements
covering the date of consummation of the business combination are issued.

Prior to the combination, Cloudscape's fiscal year ended on March 31. In
recording the pooling-of-interests combination, Informix's statement of
operations for the years ended December 31, 1998 and 1997 have been combined
with the Cloudscape statements of operations for the years ended March 31, 1999
and 1998, respectively. The Informix statement of operations for the year ended
December 31, 1996 has been combined with the Cloudscape statement of operations
for the period from August 2, 1996 (inception) through March 31, 1997. This
presentation is in accordance with the rules and regulations of the Securities
and Exchange Commission (SEC) which require that the fiscal periods combined in
the supplemental consolidated financial statements be within 93 days of
Informix's fiscal period ends. The supplemental consolidated balance sheets of
Informix at December 31, 1998 and 1997 have been combined with the balance
sheets of Cloudscape as of March 31, 1999 and 1998, respectively.

USE OF ESTIMATES. The preparation of financial statements in conformity
with general accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

PRINCIPLES OF CONSOLIDATION. The supplemental consolidated financial
statements include the accounts of Informix Corporation and its wholly owned
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation.

FOREIGN CURRENCY TRANSLATION. For foreign operations with the local
currency as the functional currency, assets and liabilities are translated at
year-end exchange rates, and statements of operations are translated at the
average exchange rates during the year. Exchange gains or losses arising from
translation

F-8
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

of such foreign entity financial statements are included as a component of other
comprehensive income (loss).

For foreign operations with the U.S. dollar as the functional currency,
monetary assets and liabilities are remeasured at the year-end exchange rates as
appropriate and non-monetary assets and liabilities are remeasured at historical
exchange rates. Statements of operations are remeasured at the average exchange
rates during the year. Foreign currency transaction gains and losses are
included in other income (expense), net. The Company recorded net foreign
currency transaction gains (losses) of $(4.8) million, $8.0 million and $0.3
million for the years ended December 31, 1998, 1997 and 1996, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS. The Company enters into foreign currency
forward exchange contracts to reduce its 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 the Company 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 currency forward exchange
contracts, to qualify as hedges of existing assets or liabilities, are
denominated in the same currency in which the underlying foreign currency
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
denominated receivables or payables are recognized and generally offset.
Contract amounts in excess of the carrying value of the Company's 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. The Company operates in certain countries in Latin America,
Eastern Europe, and Asia/Pacific where there are limited forward currency
exchange markets and thus the Company has 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 cycles for our products is relatively long, depending on a number of
factors including the level of competition and the size of the transaction. We
attempt 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. These foreign currency
forward exchange contracts do not qualify as hedges and, therefore are marked to
market, accounting for a significant portion of our net foreign currency losses
of $4.8 million in 1998. These losses are primarily offset by gains realized in
cost of software distribution resulting from these foreign currency movements.
Notwithstanding the Company's efforts to manage foreign exchange risk, there can
be no assurances that

F-9
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

the Company's hedging activities will adequately protect the Company against the
risks associated with foreign currency fluctuations.

REVENUE RECOGNITION POLICY. In October 1997, the American Institute of
Certified Public Accountants issued Statement of Position 97-2 (SOP 97-2),
"Software Revenue Recognition" which superseded SOP 91-1 and provides guidance
on generally accepted accounting principles for recognizing revenue on software
transactions. SOP 97-2 requires that revenue recognized from software
arrangements be allocated to each element of the arrangement based on the
relative fair values of the elements, such as software products, upgrades,
enhancements, post contract customer support, installation, or training. Under
SOP 97-2, the determination of fair value is based on objective evidence which
is specific to the vendor. If such evidence of fair value for each element of
the arrangement does not exist, all revenue from the arrangement is deferred
until such time that evidence of fair value does exist or until all elements of
the arrangement are delivered. SOP 97-2 was amended in February 1998 by
Statement of Position 98-4 (SOP 98-4) "Deferral of the Effective Date of a
Provision of SOP 97-2" and was amended again in December 1998 by Statement of
Position 98-9 (SOP 98-9) "Modification of SOP 97-2, Software Revenue Recognition
with Respect to Certain Transactions." Those amendments deferred and then
clarified, respectively, the specification of what was considered vendor
specific objective evidence of fair value for the various elements in a multiple
element arrangement. The Company adopted the provisions of SOP 97-2 and SOP 98-4
as of January 1, 1998 and as a result, changed certain business practices. The
adoption has, in certain circumstances, resulted in the deferral of software
license revenues that would have been recognized upon delivery of the related
software under prior accounting standards.

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.

The Company's revenue recognition policy as of January 1, 1998 is as
follows:

LICENSE REVENUE. The Company recognizes revenue from sales of software
licenses to end users upon persuasive evidence of an arrangement, delivery of
the software to a customer and determination that collection of a fixed or
determinable license fee is considered probable. Revenue for transactions with
application vendors, OEMs and distributors is currently recognized as earned
when the licenses are resold or utilized by the reseller and all related
obligations of the Company have been satisfied. The Company provides for sales
allowances on an estimated basis. The Company accrues royalty revenue through
the end of the reporting period based on reseller royalty reports or other forms
of customer-specific historical information. In the absence of customer-specific
historical information, royalty revenue is recognized when the customer-specific
objective information becomes available. Any subsequent changes to previously
recognized royalty revenues are reflected in the period when the updated
information is received from the reseller.

SERVICE REVENUE. Maintenance contracts generally call for the Company to
provide technical support and software updates and upgrades to customers.
Maintenance revenue is recognized ratably over the term of the maintenance
contract, generally on a straight-line basis. Other service revenue, primarily
training and consulting, is generally recognized at the time the service is
performed and it is determined that the Company has fulfilled its obligations
resulting from the services contract, or on a contract accounting basis. When
the fee for maintenance and service is bundled with the license fee, it is
unbundled from the license

F-10
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

fee using the Company's objective evidence of the fair value of the maintenance
and/or services represented by the Company's customary pricing for such
maintenance and/or services.

ADVANCES FROM CUSTOMERS AND FINANCIAL INSTITUTIONS. Amounts received in
advance of revenue being recognized are recorded as a liability on the
accompanying financial statements. These amounts may be received either from the
customer or from a financing entity to whom the customer payment streams are
sold.

The Company's license arrangements with some of its customers provide
contractually for a non-refundable fee payable by the customer in single or
multiple installment(s) at the initiation or over the term of the license
arrangement. If the Company fails to comply with certain contractual terms of a
specific license agreement, the Company could be required to refund the
amount(s) received to the customer or the financial institution in the event of
an assignment of receivables.

Prior to fiscal 1998, the Company's arrangements for financing of license
contracts with customers frequently took the form of a non-recourse sale of the
future payment streams. When such customer contracts were sold to a third-party
financing entity, they were typically sold at a discount which represented the
financing cost. Such discounts offset revenues in cases where the license was
recorded as a sale. For transactions where the financing was received prior to
the recognition of revenue, the financing discount has been charged ratably to
interest expense over the financing period, which approximates the "interest
method."

SALES OF RECEIVABLES. Prior to January 1, 1998, the Company financed
amounts due from customers with financial institutions on a non-recourse basis.
The Company accounted for these transactions in accordance with Statement of
Financial Accounting Standards No. 77 (SFAS 77), "Reporting by Transferors for
Transfers of Receivables with Recourse." Effective January 1, 1998, any such
transactions would be accounted for by the Company in accordance with Statement
of Financial Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities." If at the
time of the transfer the amounts due from the customer have been recognized as
revenue and a receivable, the transfer is accounted for as the sale of a
receivable and the receivable is removed from the books and the financing fees
are charged to operations immediately as interest expense. The Company did not
enter into any such transactions during fiscal 1998.

SALES OF FUTURE REVENUE STREAMS. If at the time of transfer the amounts due
from the customers have not been recognized as revenue or a receivable, the
transfer is accounted for as the sale of a future revenue stream in accordance
with EITF 88-18. Accordingly, the receipt of cash is treated as a borrowing and
recorded as "advances from customers and financial institutions" and the
financing fees are amortized to interest expense over the term of the financing
arrangement. The Company has not financed, and does not expect to finance,
amounts due from customers subsequent to December 31, 1997.

CONCURRENT TRANSACTIONS. In fiscal 1996 and 1997, the Company entered into
software license agreements with certain computer and service vendors where the
Company concurrently committed to acquire goods and services. If the agreement
is with a reseller, revenue is recognized as earned on these transactions as the
licenses are resold by the customer. If the agreement is with an end user,
revenue is generally recognized as earned upon delivery of software. The
computer equipment and services are recorded at their fair value. These
concurrent transactions for 1996 included license agreements of approximately
$170 million and committments by the Company to acquire goods and services in
the

F-11
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

aggregate of approximately $130 million. Concurrent transactions in 1997
included software license agreements of approximately $21 million and
commitments by the Company to acquire goods and services in the aggregate of
approximately $50 million. The Company did not enter into any significant
concurrent transactions in fiscal 1998.

INVENTORIES. Inventories, which consist primarily of software product
components, finished software products, and marketing and promotional materials,
are carried at the lower of cost (first in, first out) or market value, and are
included in other current assets.

SOFTWARE COSTS. The Company accounts for its software development expenses
in accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed." This statement requires that, once technological feasibility of a
developing product has been established, all subsequent costs incurred in
developing that product to a commercially acceptable level be capitalized and
amortized ratably over the revenue life of the product. The Company uses a
detail program design approach in determining technological feasibility.
Software costs also include amounts paid for purchased software and outside
development on products which have reached technological feasibility. All
software costs are amortized as a cost of software distribution over the
remaining estimated economic life of the product, which is generally estimated
to be three years. The Company recorded amortization of $20.7 million, $21.4
million, and $14.6 million of software costs in 1998, 1997 and 1996,
respectively, in cost of software distribution.

PROPERTY AND EQUIPMENT. Depreciation of property and equipment is
calculated using the straight-line method over its estimated useful life,
generally the shorter of the applicable lease term or three-to-seven years for
financial reporting purposes. The Company reviews property and equipment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability of
property and equipment to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Property and equipment to be disposed of
are reported at the lower of the carrying amount or fair value less costs to
sell.

BUSINESSES ACQUIRED. The purchase price of businesses acquired, accounted
for as purchase business combinations, is allocated to the tangible and
identifiable intangible assets acquired based on their estimated fair values
with any amount in excess of such allocations being designated as goodwill.
Intangible assets are amortized over their estimated useful lives, which to date
range from five to seven years. As of December 31, 1998, 1997 and 1996, the
Company had $48.3 million, $19.2 million and $50.6 million of intangible assets,
with accumulated amortization of $6.8 million, $10.9 million and $15.9 million,
respectively, as a result of these acquisitions. The carrying value of goodwill
is evaluated for recoverability if the facts and circumstances suggest that it
may be impaired. If this evaluation indicates that the goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the acquired
business over the remaining amortization period, the Company's carrying value is
reduced to net realizable value. The carrying values of specified intangible
assets are reviewed in a manner consistent with the policy for reviewing
impairment of property and equipment, as described above. During 1997, the
Company wrote down $30.5 million of impaired long-term assets related to the
shortfall in business activity of its Japanese subsidiary (see Note 13). There
were no writedowns of intangible assets in 1998 or 1996.

F-12
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION. As permitted under Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," the Company has elected to follow Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees" in
accounting for stock-based awards to employees (see Note 7).

CONCENTRATION OF CREDIT RISK. The Company designs, develops, manufactures,
markets, and supports computer software systems to customers in diversified
industries and in diversified geographic locations. The Company performs ongoing
credit evaluations of its customers' financial condition and generally requires
no collateral.

No single customer accounted for 10% or more of the consolidated net
revenues of the Company in 1998, 1997 or 1996.

CASH, CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, AND LONG-TERM
INVESTMENTS. The Company considers liquid investments purchased with a
remaining maturity of three months or less to be cash equivalents. The Company
considers investments with a maturity of more than three months but less than
one year to be short-term investments. Investments with a remaining original
maturity of more than one year are considered long-term investments. Short-term
and long-term investments are classified as available-for-sale and are carried
at fair value.

The Company invests its excess cash in accordance with its short-term and
long-term investments policy, which is approved by the Board of Directors. The
policy authorizes the investment of excess cash in government securities,
municipal bonds, time deposits, certificates of deposit with approved financial
institutions, commercial paper rated A-1/P-1, and other specific money market
instruments of similar liquidity and credit quality. The Company has not
experienced any significant losses related to these investments.

The Company invests in equity instruments of privately-held, information
technology companies for business and strategic purposes. These investments are
included in long-term investments and are accounted for under the cost method
when ownership is less than 20%. For these non-quoted investments, the Company's
policy is to regularly review the assumptions underlying the operating
performance and cash flow forecasts in assessing the carrying values. When the
Company determines that a decline in fair value below the cost basis is other
than temporary, the related investment is written down to fair value.

SECURITIES HELD-TO-MATURITY AND AVAILABLE-FOR-SALE. Management determines
the appropriate classification of debt securities at the time of purchase and
re-evaluates such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity when the Company has the positive intent and the
ability to hold the securities until maturity. Held-to-maturity securities are
stated at amortized cost, adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization, as well as any interest on the
securities, is included in interest income.

Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses, net
of tax, reported as a component of other comprehensive income (loss). The
amortized cost of debt securities in this category is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization is
included in interest income. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are included
in other income (expense), net. The cost of securities sold is based on the
specific identification method. Interest on securities

F-13
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

classified as available-for-sale is included in interest income. The Company
realized gross gains of approximately $8.5 million and $5.2 million and gross
losses of approximately $1.2 million and $1.3 million on the sale of
available-for-sale equity securities during 1997 and 1996, respectively.
Realized gains and losses were not significant in 1998.

FAIR VALUE OF FINANCIAL INSTRUMENTS. Fair values of cash, cash equivalents,
short and long term investments and foreign currency forward contracts are based
on quoted market prices.

RECLASSIFICATIONS. Certain prior period amounts have been reclassified to
conform to the current period presentation.

NOTE 2 - BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Property and equipment, net:
Computer equipment.................................. $ 182,545 $ 190,245
Furniture and fixtures.............................. 35,804 36,286
Leasehold improvements.............................. 33,297 34,722
Buildings and other................................. 2,511 2,291
--------- ---------
254,157 263,544
Less: accumulated amortization...................... (178,312) (167,119)
--------- ---------
$ 75,845 $ 96,425
========= =========

Long-term investments:
Marketable equity securities (Note 3)............... $ 10,308 $ 3,083
Investments in privately-held companies............. 5,874 9,375
Corporate bonds..................................... 6,009 --
--------- ---------
$ 22,191 $ 12,458
========= =========
</TABLE>

F-14
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 - FINANCIAL INSTRUMENTS

The following is a summary of available-for-sale debt and equity securities:

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1998 COST GAINS LOSSES FAIR VALUE
- ----------------- -------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. treasury securities............................ $ 8,363 $ -- $ -- $ 8,363
Commercial paper, corporate bonds and medium-term
notes............................................. 99,522 211 (28) 99,705
Municipal bonds..................................... 28,866 23 (1) 28,888
International bonds................................. 3,004 -- -- 3,004
-------- ------ ----- --------
Total debt securities............................. 139,755 234 (29) 139,960
U.S. equity securities.............................. 6,046 4,717 (455) 10,308
-------- ------ ----- --------
$145,801 $4,951 $(484) $150,268
======== ====== ===== ========

Amounts included in cash and cash equivalents....... $ 92,690 $ 168 $ -- $ 92,858
Amounts included in short-term investments.......... 41,032 63 (2) 41,093
Amounts included in long-term investments........... 12,079 4,720 (482) 16,317
-------- ------ ----- --------
$145,801 $4,951 $(484) $150,268
======== ====== ===== ========
</TABLE>

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1997 COST GAINS LOSSES FAIR VALUE
- ----------------- -------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. treasury securities............................ $ 3,701 $ 1 $ -- $ 3,702
Commercial paper, corporate bonds and medium-term
notes............................................. 51,547 25 -- 51,572
Municipal bonds..................................... 11,903 -- (3) 11,900
Repurchase agreements............................... 23,262 -- -- 23,262
-------- ------ ----- --------
Total debt securities............................. 90,413 26 (3) 90,436
U.S. equity securities.............................. 3,866 -- (783) 3,083
-------- ------ ----- --------
$ 94,279 $ 26 $(786) $ 93,519
======== ====== ===== ========

Amounts included in cash and cash equivalents....... $ 74,343 $ 25 $ (1) $ 74,367
Amounts included in short-term investments.......... 16,070 1 (2) 16,069
Amounts included in long-term investments........... 3,866 -- (783) 3,083
-------- ------ ----- --------
$ 94,279 $ 26 $(786) $ 93,519
======== ====== ===== ========
</TABLE>

F-15
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 - FINANCIAL INSTRUMENTS (CONTINUED)

Maturities of debt securities at market value at December 31, 1998 are as
follows (in thousands):

<S> <C>
Mature in one year or less.................................. $133,951
Mature after one year through five years.................... 6,009
Mature after five years..................................... --
--------
$139,960
========
</TABLE>

NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into foreign currency forward exchange contracts
primarily to hedge the value of intercompany accounts receivable or accounts
payable denominated in foreign currencies against fluctuations in exchange rates
until such receivables are collected or payables are disbursed. Subsequent to
fiscal year end 1997, the Company began entering into foreign currency forward
exchange contracts to hedge no more than 80% of anticipated net income of
foreign subsidiaries of up to a maximum of one year in the future. From an
accounting perspective, these hedges are considered to be speculative. The
Company's outstanding foreign currency forward exchange contracts used to hedge
anticipated net income are marked to market with unrealized gains and losses
recognized as incurred in results of operations. The purpose of the Company's
foreign exchange exposure management policy and practices is to attempt to
minimize the impact of exchange rate fluctuations on the value of the foreign
currency denominated assets and liabilities being hedged. Substantially all
forward foreign exchange contracts entered into by the Company have maturities
of 360 days or less. There are no significant unrealized gains or losses on
these contracts at December 31, 1998 and 1997. At December 31, 1998 and 1997,
the Company had approximately $93.9 million and $102.7 million of foreign
currency forward exchange contracts outstanding, respectively.

F-16
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

The table below summarizes by currency the contractual amounts of the
Company's foreign currency forward exchange contracts at December 31, 1998 and
December 31, 1997. The information is provided in U.S. dollar equivalents and
presents the notional amount (contract amount), the unrealized gain (loss) and
fair value. Fair value represents the difference in value of the contracts at
the spot rate at December 31, 1998 and the forward rate, plus the unamortized
premium or discount. All contracts mature within twelve months.

FORWARD CONTRACTS

<TABLE>
<CAPTION>
UNREALIZED
AT DECEMBER 31, 1998 CONTRACT AMOUNT GAIN/(LOSS) FAIR VALUE
- -------------------- --------------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Forward currency to be sold under contract:
Japanese Yen........................................... $11,719 $ 13 $(262)
Deutsche Mark.......................................... 8,092 (1) 39
Korean Won............................................. 5,250 5 (119)
Singapore Dollar....................................... 4,264 17 45
British Pound.......................................... 3,322 -- (30)
Australian Dollar...................................... 2,756 (4) (2)
Netherland Guilder..................................... 2,087 (3) 7
Swiss Franc............................................ 2,010 3 21
Brazilian Real......................................... 1,382 -- (273)
Other (individually less than $1 million).............. 2,926 (6) (36)
------- ---- -----
Total.................................................... $43,808 $ 24 $(610)
------- ---- -----

Forward currency to be purchased under contract:
British Pound.......................................... $42,576 $ (8) $ 81
French Franc........................................... 3,046 (1) (17)
Swedish Krona.......................................... 1,493 (16) (23)
Danish Krone........................................... 1,316 1 (3)
Other (individually less than $1 million).............. 1,692 9 24
------- ---- -----
Total.................................................... $50,123 $(15) $ 62
------- ---- -----
Grand Total.............................................. $93,931 $ 9 $(548)
======= ==== =====
</TABLE>

F-17
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

<TABLE>
<CAPTION>
UNREALIZED
AT DECEMBER 31, 1997 CONTRACT VALUE GAIN/(LOSS) FAIR VALUE
- -------------------- -------------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Forward currency to be sold under contract:
British Pound............................................ $ 55,740 $ 28 $241
Deutsche Mark............................................ 17,050 13 (75)
French Franc............................................. 14,139 9 (66)
Italian Lira............................................. 3,901 4 4
Spanish Peseta........................................... 3,166 1 (7)
Swedish Krona............................................ 1,682 2 (3)
Other (individually less than $1 million)................ 2,090 41 47
-------- ---- ----
Total...................................................... $ 97,768 $ 98 $141
-------- ---- ----

Forward currency to be purchased under contract:
Swiss Franc.............................................. $ 1,636 $ (1) $ 16
Dutch Guilder............................................ 1,096 -- 5
Other (individually less than $1 million)................ 2,208 15 12
-------- ---- ----
Total...................................................... $ 4,940 $ 14 $ 33
-------- ---- ----
Grand Total................................................ $102,708 $112 $174
======== ==== ====
</TABLE>

While the contract amounts provide one measure of the volume of these
transactions, they do not represent the amount of the Company's exposure to
credit risk. The amounts (arising from the possible inabilities of
counterparties to meet the terms of their contracts) are generally limited to
the amounts, if any, by which the counterparties' obligations exceed the
obligations of the Company as these contracts can be settled on a net basis at
the option of the Company. The Company controls credit risk through credit
approvals, limits and monitoring procedures.

As of December 31, 1998, other than foreign currency forward exchange
contracts discussed immediately above, the Company does not currently invest in
or hold any other derivative financial instruments.

NOTE 5 - PREFERRED STOCK

In August 1997, the Company sold 160,000 shares of newly authorized
Series A Convertible Preferred Stock, face value $250 per share, which shares
are generally not entitled to vote on corporate matters, to a private investor
for aggregate net proceeds of $37.6 million and issued a warrant to the same
investor to purchase up to an additional 140,000 shares of Series A Convertible
Preferred Stock at an aggregate purchase price of up to $35 million. In
November 1997, the Company canceled the Series A Convertible Preferred Stock in
exchange for the same number of shares of a substantially identical Series A-1
Convertible Stock (the "Series A-1 Preferred") issued to the same investor, with
a corresponding change to the warrant shares. The mandatory redemption
provisions of the new Series A-1 Preferred differ from the Series A Convertible
Preferred Stock. The redemption provisions in the Series A-1 Preferred
effectively preclude the Company from having to redeem the preferred stock
except by actions solely within its control. Accordingly, the Supplemental
Consolidated Balance Sheet reflects the Series A-1 Preferred under stockholder's
equity.

The Series A-1 Preferred shares are convertible into common shares at any
time, at the holder's option, at a per share price equal to 101% of the average
price of the Company's common stock for the 30 days ending five trading days
prior to conversion, but not greater than the lesser of (i) 105% of the

F-18
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - PREFERRED STOCK (CONTINUED)

common stock's average price of the first five trading days of such thirty day
period, or (ii) $12 per share. If not converted prior, the Series A-1 Preferred
will automatically convert into common shares eighteen months after their
issuance, subject to extension of the automatic conversion date in certain
defined circumstances of default. However, if at the time of conversion, the
aggregate number of shares of common stock already issued and to be issued as a
result of the conversion of the shares of the Series A-1 Convertible Preferred
Stock were to exceed 19.9% of the total number of shares of then outstanding
common stock, then such excess does not convert unless or until stockholder
approval is obtained.

On February 13, 1998, the holders of the Series A-1 Preferred Stock
exercised warrants to purchase 60,000 additional shares of Series A-1 Preferred
at $250 per share resulting in net proceeds to the Company of $14.1 million. In
addition, pursuant to the Series A-1 Subscription Agreement, the Series A-1
Preferred stockholders converted 220,000 shares of Series A-1 Preferred into
12,769,908 shares of the Company's Common Stock.

On November 25, 1998, the holders of the Series A-1 Preferred Stock
exercised their remaining warrants to purchase 80,000 additional shares of
Series A-1 Preferred at $250 per share resulting in net proceeds to the Company
of $18.8 million. In addition, pursuant to the Series A-1 Subscription
Agreement, the Series A-1 Preferred stockholders converted the remaining 80,000
shares of Series A-1 Preferred into 4,642,525 shares of the Company's Common
Stock. As a result of these conversions, no Series A-1 Preferred Stock or
Series A-1 Preferred warrants were outstanding at December 31, 1998.

In November 1997, the Company sold 50,000 shares of newly authorized Series
B Convertible Preferred Stock ("Series B Preferred"), face value $1,000 per
share, which shares are generally not entitled to vote on corporate matters, to
private investors for aggregate proceeds of $50.0 million (excluding a $1.0
million fee paid to a financial advisor of the Company). In connection with the
sale, the Company also agreed to issue a warrant to such investors upon
conversion of such Series B Preferred to purchase 20% of the shares of Common
Stock into which the Series B Preferred is convertible, but no less than
1,500,000 shares at a per share exercise price which is presently indeterminable
and will depend on the trading price of the Common Stock of the Company in the
period prior to the conversion of the Series B Preferred. The Company also
agreed to issue additional warrants to purchase up to an aggregate of 200,000
shares at a per share exercise price which is presently indeterminable and will
depend on the trading price of the Common Stock of the Company in the period
prior to the conversion of the Series B Preferred. The Series B Preferred is
convertible at the election of the holder into shares of Common Stock beginning
six months after issuance, and upon the occurrence of certain events, including
a merger. The Series B Preferred will automatically convert into Common Stock
three years following the date of its issuance. Each Series B Preferred share is
convertible into the number of shares of Common Stock at a per share price equal
to the lowest of (i) the average of the closing prices for the Common Stock for
the 22 days immediately prior to the 180th day following the initial issuance
date, (ii) 101% of the average closing price for the 22 trading days prior to
the date of actual conversions, or (iii) 101% of the lowest closing price for
the Common Stock during the five trading days immediately prior to the date of
actual conversion. The conversion price of the Series B Preferred is subject to
modification and adjustment upon the occurrence of certain events. The Company
reserved 22.8 million shares of Common Stock for issuance upon conversion of the
Series B Preferred and upon exercise of the Series B Warrants.

The Series B Preferred accrues cumulative dividends at an annual rate of 5%
of per share face value. The dividend is generally payable upon the conversion
or redemption of the Series B Preferred, and may be paid in cash or, at the
holder's election, in shares of Common Stock. The Series B is junior to the

F-19
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - PREFERRED STOCK (CONTINUED)

Company's outstanding Series A-1 Preferred in respect to the right to receive
dividend payments and liquidation preferences.

On June 10, 1998, a holder of the Series B Preferred Stock converted 500
shares of Series B Preferred into 80,008 shares of the Company's Common Stock.
In connection with such conversion, the Company also issued such Series B
Preferred Stockholder a warrant to purchase up to 66,000 shares of Common Stock
at a purchase price of $7.84 per share. Also, during the quarter ended June 30,
1998, the Company issued a warrant pursuant to the provisions of the Series B
Preferred to purchase up to an additional 50,000 shares of Common Stock at a
purchase price of $7.84 per share to a financial advisor of the Company because,
as of May 15, 1998, the closing sales price of the Company's Common Stock was
less than $12.50. Such warrant was issued in connection with services provided
by such financial advisor related to the sale of shares of the Series B
Preferred in November 1997.

During the third and fourth quarters of fiscal 1998, holders of the
Series B Preferred Stock converted a total of 26,200 shares of Series B
Preferred into 6,391,639 shares of the Company's Common Stock. In connection
with such conversions, the Company also issued such Series B Preferred
Stockholders warrants to purchase up to 1,428,319 shares of Common Stock at a
purchase price of $7.84 per share and paid cash dividends in the amount of
$1,170,068 to such stockholders.

During the nine-month period ended September 30, 1999, holders of the
Series B Preferred Stock converted a total of 4,300 shares of Series B Preferred
into 626,393 shares of the Company's Common Stock. In connection with such
conversions, the Company also issued such Series B Preferred Stockholders
warrants to purchase up to 125,276 shares of Common Stock at a purchase price of
$7.84 per share and paid cash dividends in the amount of $334,178 to such
stockholders.

The fair value of the warrants issued in connection with the Series A-1
Preferred and Series B Preferred are deemed to be a discount to the conversion
price of the respective equity instruments available to the preferred
stockholders. The discounts were recognized as a return to the preferred
stockholders (similar to a dividend) over the minimum period during which the
preferred stockholders could realize this return, immediate for the Series A-1
Preferred and six months for the Series B Preferred. The discount has been
accreted to additional paid in capital (accumulated deficit) in the Company's
balance sheet and has been disclosed as a decrease in the amount available to
common stockholders on the face of the Company's statements of operations and
for purposes of computing net income (loss) per share. The fair value assigned
to the warrants is based on an independent appraisal performed by a nationally
recognized investment banking firm. The appraisal was completed utilizing the
Black-Scholes valuation model. This model requires assumptions related to the
remaining life of the warrant, the risk free interest rate at the time of
issuance, stock volatility, and an illiquidity factor associated with the
security. These assumptions and the values assigned to the Series A-1 and
Series B warrants were as follows:

<TABLE>
<CAPTION>
SERIES A-1 SERIES B
------------ ------------
<S> <C> <C>
Volatility........................................ 0.4 0.6
Expected life..................................... 18 months 24 months
Risk free interest rate........................... 5.6% 5.6%
Dividend yield.................................... 0% 0%
Illiquidity discount.............................. 33% 33%
Exercise price.................................... $7.59 $9.73
Assigned value.................................... $0.9 million $2.7 million
</TABLE>

F-20
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - PREFERRED STOCK (CONTINUED)

In connection with the issuance of the Series B Convertible Preferred Stock
in November 1997, the Company paid a fee of $1,000,000 for financial advisory
services provided in connection with such financing. In addition, the Company
issued 100,000 shares of its Common Stock, and also agreed to issue a warrant to
purchase an additional 50,000 shares of the Company's Common Stock to the
service provider in the event that, as of May 17, 1998, the trading price of the
Company's Common Stock is less than $12.50 per share. Such warrant will be
exercisable according to the same terms as the warrants issued in connection
with the issuance of the Series B Convertible Preferred Stock.

On June 9, 1998, the Company filed a Post-Effective Amendment to its
Registration Statement on Form S-1 pertaining to the Company's sale of its
Series B Preferred. The Securities and Exchange Commission ("SEC") reviewed the
Post-Effective Amendment and declared it effective on August 13, 1998. The
Series B Preferred stockholders claimed that during August 1998 they were
prevented from selling shares of Series B Preferred stock until the SEC
completed its review of the Post-Effective Amendment and, as a result, the
Company had failed to comply with certain terms of a Registration Rights
Agreement between the Series B Preferred stockholders and the Company. As a
result, the Company recorded a $1.3 million dividend as of December 31, 1998,
which was paid in cash to the Series B Preferred stockholders in the second
quarter of 1999.

As of December 31, 1998, 6,343,000 shares of preferred stock were
outstanding that related to Series A, B, and C preferred stock issuances by
Cloudscape ("Cloudscape Preferred Stock") in fiscal 1996, 1997, and 1998,
respectively. Each series of Cloudscape Preferred Stock maintained noncumulative
dividend rights and liquidation preferences to any proceeds received in the
event of a liquidation of Cloudscape. Additionally, the Cloudscape Preferred
Stock was convertible into Cloudscape Common Stock on a one-for-one basis and
the holders of the Cloudscape Preferred Stock were entitled to the number of
votes based on an as-if converted basis. Immediately prior to the merger between
Informix and Cloudscape on October 8, 1999, all the Cloudscape preferred
shareholders converted their Cloudscape Preferred Stock into an equal number of
shares of Cloudscape Common Stock.

F-21
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 - NET INCOME (LOSS) PER COMMON SHARE

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

<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Net income (loss)......................................... $ 50,184 $(360,388) $(74,019)
Preferred stock dividends................................. (3,478) (301) --
Value assigned to warrants................................ (1,982) (1,601) --
-------- --------- --------
Numerator for basic and diluted net income (loss) per
common share............................................ $ 44,724 $(362,290) $(74,019)
======== ========= ========

Denominator:
Denominator for basic net income (loss) per common share--
weighted-average shares................................. 169,581 152,543 149,525
Effect of dilutive securities:
Employee stock options and restricted stock............. 4,277 -- --
Series A-1 convertible preferred stock.................. 2,748 -- --
Cloudscape Convertible Preferred Stock.................. 5,794 -- --
-------- --------- --------
Denominator for diluted net income (loss) per common
share--adjusted weighted-average shares and assumed
conversions............................................. 182,400 152,543 149,525
======== ========= ========
Basic net income (loss) per common share.................... $ 0.26 $ (2.37) $ (0.49)
======== ========= ========
Diluted net income (loss) per common share.................. $ 0.25 $ (2.37) $ (0.49)
======== ========= ========
</TABLE>

F-22
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 - NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)

dilutive. A summary of the excluded potentially dilutive securities and the
related exercise/conversion features follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Potentially dilutive securities:
Stock options and restricted common stock................... 10,018 20,367 17,221
Stock warrants
Common Stock (Series B Warrants).......................... 1,750 1,750 --
Series A-1 Warrants....................................... -- 140 --
Series A-1 Convertible Preferred Stock
Preferred Shares.......................................... -- 160 --
Equivalent common shares upon assumed conversion.......... -- 4,955 --
Series B Convertible Preferred Stock
Preferred Shares.......................................... 23 50 --
Equivalent common shares upon assumed conversion.......... 7,901 3,387 --
Cloudscape Convertible Preferred Stock...................... -- 3,409 429
</TABLE>

The stock options have per share exercise prices ranging from $6.75 to
$42.09, $10.78 to $34.25, and $25.63 to $34.75 at December 31, 1998, 1997 and
1996, respectively.

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 into shares of Common Stock of the Company.
Upon conversion of the Series B Preferred, 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 is convertible, but not less than an aggregate of 1,750,000,
of which approximately 1,494,000 have been issued as of December 31, 1998, at a
per share exercise price of $7.84. The Series B Warrants are exercisable through
November 2002.

Warrants to purchase shares of the Company's Series A-1 Preferred (the
"Series A-1 Warrants") were exercised into shares of Series A-1 Preferred at a
per share price of $250 and converted into 8,125,000 shares of Common Stock
during 1998. No Series A-1 Warrants were outstanding as of December 31, 1998.

Certain of the outstanding shares of Cloudscape Common Stock held by
employees are subject to repurchase upon termination of employment. The number
of shares subject to this repurchase right decreases as the shares vest over
time, generally four years. As of December 31, 1998, 1997 and 1996, 1,407,000,
992,000, and 1,377,000 shares, respectively, were subject to repurchase.

NOTE 7 - EMPLOYEE BENEFIT PLANS

OPTION PLANS

Under the Company's 1986 Employee Stock Option Plan, options are granted at
fair market value on the date of the grant. Options are generally exercisable in
cumulative annual installments over three to five years. Payment for shares
purchased upon exercise of options may be by cash or, with Board approval, by
full recourse promissory note or by exchange of shares of the Company's common
stock at fair market

F-23
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 - EMPLOYEE BENEFIT PLANS (CONTINUED)

value on the exercise date. Unissued options under the 1986 Plan expired on July
29, 1996, which was 10 years after adoption of the plan.

Additionally, 1,600,000 shares were authorized for issuance under the 1989
Outside Directors Stock Option Plan, whereby non-employee directors are
automatically granted non-qualified stock options upon election or re-election
to the Board of Directors. At December 31, 1998, 600,000 shares were available
for grant under this Plan.

In April 1994, the Company adopted the 1994 Stock Option and Award Plan;
8,000,000 shares were authorized for grant under this Plan. Options can be
granted to employees on terms substantially equivalent to those described above.
The 1994 Stock Option and Award Plan also allows the Company to award
performance shares of the Company's common stock to be paid to recipients on the
achievement of certain performance goals set with respect to each recipient. In
May 1997, the Company's stockholders approved an additional 8,000,000 shares to
be reserved for issuance under the Company's 1994 Stock Option and Award Plan.
At December 31, 1998, 4,116,930 shares were available for grant under this Plan.

In July 1997, the Company's Board of Directors approved a resolution
authorizing the grant of a maximum of 500,000 non-statutory stock options to
executives and other employees, as determined by the Board, under the newly
created 1997 Non-Statutory Stock Option Plan ("the 1997 Stock Plan"). The
authorization of such shares for grant under the 1997 Stock Plan is not subject
to stockholder approval. Terms of each option are determined by the Board or
committee delegated such duties by the Board. Concurrent with the authorization
of the 1997 Stock Plan, the Board granted the Company's current chief executive
officer 500,000 options to purchase the Company's common stock thereunder. Such
options vest ratably over five years beginning with the first anniversary of the
date of grant.

In September 1997, the Company's Board of Directors authorized the repricing
of outstanding options to purchase Common Stock under the Company's stock option
plans. Employees were eligible to participate only if they remained actively
employed at the effective date of the repricing and were only permitted to
exchange options granted and outstanding prior to May 1, 1997. The
repricing/option exchange was effective November 21, 1997 (the "Repricing
Effective Date"). The repricing program offered eligible employees the
opportunity to exchange eligible outstanding options with exercise prices in
excess of the closing sales price of the Company's Common Stock on the Repricing
Effective Date for a new option with an exercise price equal to such price.
Other than the exercise price, each new option issued upon exchange has terms
substantially equivalent to the surrendered option, including the number of
shares, vesting terms and expiration except that options issued in connection
with the exchange may not be exercised for a period of one year from the
Repricing Effective Date. In addition, officers of the Company participating in
the option exchange were required to forfeit 20% of the shares subject to each
option being surrendered. The exercise price for repriced options was $7.1563,
the closing sales price of the Company's Common Stock on the Repricing Effective
Date.

In December 1997, the Company's Board of Directors authorized the repricing
of outstanding options to purchase Common Stock under the Company's stock option
plans. Employees were eligible to participate only if they remained actively
employed at the effective date of the repricing and were only permitted to
exchange options granted and outstanding prior to May 1, 1997. The
repricing/option exchange was effective January 9, 1998 (the "Repricing
Effective Date"). The repricing program offered eligible employees the
opportunity to exchange eligible outstanding options with exercise prices in
excess of the closing sales price of the Company's Common Stock on the Repricing
Effective Date for a new

F-24
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 - EMPLOYEE BENEFIT PLANS (CONTINUED)

option with an exercise price equal to such price. Other than the exercise
price, each new option issued upon exchange has terms substantially equivalent
to the surrendered option, including the number of shares, vesting terms and
expiration except that options issued in connection with the exchange may not be
exercised for a period of one year from the Repricing Effective Date. In
addition, Officers and Directors of the Company were not eligible to have their
shares repriced. The exercise price for repriced options was $5.0938, the
closing sales price of the Company's Common Stock on the Repricing Effective
Date.

In July 1998, the Company adopted the 1998 Non-Statutory Stock Option Plan;
5,500,000 shares were authorized for grant under this Plan. Options can be
granted to employees on terms substantially equivalent to those described above.
At December 31, 1998, 2,341,451 shares were available for grant under this Plan.

As a result of its acquisition of Red Brick Systems, Inc. ("Red Brick") in
December 1998, the Company assumed all outstanding Red Brick stock options which
had been issued under Red Brick's 1995 Stock Option Plan (including options
granted under the predecessor 1991 Stock Option Plan) and Supplemental Stock
Option Plan. Each Red Brick stock option so assumed is subject to the same terms
and conditions as the original grant, except that each option was adjusted at a
ratio of 0.6 shares of Informix common stock for each one share of Red Brick
common stock, and the exercise price was adjusted by multiplying the exercise
price by 0.6.

As a result of its acquisition of Cloudscape, Inc. ("Cloudscape") in October
1999, the Company assumed all outstanding Cloudscape stock options which had
been issued under Cloudscape's 1996 Equity Incentive Plan. Each Cloudscape stock
option so assumed is subject to the same terms and conditions as the original
grant, except that each option was adjusted at a ratio of approximately 0.56
shares of Informix common stock for each one share of Cloudscape common stock,
and the exercise price was adjusted by multiplying the exercise price by
approximately 0.56.

F-25
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 - EMPLOYEE BENEFIT PLANS (CONTINUED)

Following is a summary of activity for all stock option plans for the three
years ended December 31, 1998:

<TABLE>
<CAPTION>
NUMBER OF OPTIONS
SHARES PRICE PER SHARE
----------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995............... 15,753,082 $0.06 to $34.00
</TABLE>

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
----------------
<S> <C> <C>
Options granted and assumed...................... 5,965,637 $23.8760
Options exercised................................ (2,935,603) 4.5940
Options canceled................................. (1,561,800) 17.1483
-----------
Outstanding at December 31, 1996................. 17,221,316 13.3663
Options granted and assumed...................... 14,433,864 7.8378
Options exercised................................ (1,279,878) 2.6103
Options canceled................................. (10,008,150) 18.8573
-----------
Outstanding at December 31, 1997................. 20,367,152 7.5088
Options granted.................................. 10,349,476 5.3990
Options assumed.................................. 2,466,727 5.4012
Options exercised................................ (3,570,217) 2.4007
Options canceled................................. (8,866,872) 9.1053
-----------
Outstanding at December 31, 1998................. 20,746,266 $ 6.3791
-----------
</TABLE>

The following table summarizes information about options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS OF AVERAGE
RANGE OF EXERCISE PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1998 EXERCISE PRICE
- ------------------------ ----------------- ---------------- -------------- ----------------- --------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
$0.0800 - $5.0938.......... 7,871,874 7.29 $ 4.0420 2,943,572 $ 2.5647
$5.1563 - $6.7500.......... 4,608,573 9.45 5.5609 158,526 6.6740
$6.7813 - $9.0313.......... 5,831,557 8.13 8.2713 1,927,676 8.1340
$9.0625 - $13.3400......... 2,245,793 8.18 10.8698 960,198 10.9714
$13.5500 - $33.2500........ 179,469 7.37 20.5408 149,514 19.8744
$42.0900................... 9,000 7.80 42.0900 4,500 42.0900
---------- ---------
$0.0800 - $42.0900......... 20,746,266 8.12 6.5234 6,143,986 6.4902
---------- ---------
</TABLE>

In connection with all stock option plans, 31,869,993 shares of Common Stock
were reserved for issuance as of December 31, 1998, and 6,143,986 options were
exercisable. At December 31, 1997, 36,631,617 shares of Common Stock were
reserved for issuance, and 8,543,778 options were exercisable.

EMPLOYEE STOCK PURCHASE PLAN

The Company had a qualified Employee Stock Purchase Plan (ESPP) under which
7,600,000 shares of common stock, in the aggregate, were authorized for
issuance. Under the terms of the Plan, employees

F-26
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 - EMPLOYEE BENEFIT PLANS (CONTINUED)

could contribute, through payroll deductions, up to 10 percent of their base pay
and purchase up to 20,000 shares per quarter (with the limitation of purchases
of $25,000 annually in fair market value of the shares). Employees could elect
to withdraw from the Plan during any quarter and have their contributions for
the period returned to them. Also, employees could elect to reduce the rate of
contribution one time in each quarter. The price at which employees could
purchase shares was 85 percent of the lower of the fair market value of the
stock at the beginning or end of the quarter. The Plan was qualified under
Section 423 of the Internal Revenue Code of 1986, as amended. During 1997 and
1996, the Company issued 573,343 shares and 616,128 shares, respectively, under
this Plan. The Plan was terminated on July 1, 1997, which was 10 years after the
offering date for the Plan's first offering period.

In May 1997, the Company's stockholders approved the 1997 Employee Stock
Purchase Plan (the "1997 ESPP"). The Company has reserved 4,000,000 shares of
Common Stock for issuance under the 1997 ESPP. The 1997 ESPP permits
participants to purchase Common Stock through payroll deductions of up to 15
percent of an employee's compensation, including commissions, overtime, bonuses
and other incentive compensation. The price of Common Stock purchased under the
1997 ESPP is equal to 85 percent of the lower of the fair market value of the
Common Stock at the beginning or at the end of each calendar quarter in which an
eligible employee participates. The Plan qualifies as an employee stock purchase
plan under Section 423 of the Internal Revenue Code of 1986, as amended. During
fiscal 1998, the Company issued approximately 1,613,000 shares of Common Stock
under the 1997 ESPP. No shares of Common Stock were issued under this plan
during fiscal 1997.

STOCK-BASED COMPENSATION

As permitted under Statement of Financial Accounting Standards No. 123 (SFAS
123), "Accounting for Stock-Based Compensation," the Company has elected to
continue to follow Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees" in accounting for stock-based awards
to employees. Under APB 25, the Company generally recognizes no compensation
expense with respect to such awards.

Pro forma information regarding the net income (loss) and net income (loss)
per share is required by SFAS 123 for awards granted or modified after December
31, 1994 as if the Company had accounted for its stock based awards to employees
under the fair value method of SFAS 123. The fair value of the Company's
stock-based awards to employees was estimated using a Black-Scholes option
pricing model.

The fair value of the Company's stock-based awards was estimated assuming no
expected dividends and the following weighted-average assumptions:

<TABLE>
<CAPTION>
1998 1997 1996 1998 1997 1996
-------- -------- ------------ ------------ ------------ ------------
OPTIONS ESPP
---------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected life (years)..... 4.5 4.5 4.5 0.25 .25 .25
Expected volatility....... 72.57% 79.00% 58.22-63.27% 55.98-94.99% 50.66-89.54% 57.65-96.62%
Risk-free interest rate... 4.66% 5.71% 5.20-6.09% 4.69-5.3% 5.23-5.40% 5.01-5.85%
</TABLE>

F-27
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 - EMPLOYEE BENEFIT PLANS (CONTINUED)

For pro forma purposes, the estimated fair value of the Company's stock
based awards is amortized over the award's vesting period (for options) and the
three month purchase period (for stock purchases under the ESPP). The Company's
pro forma information follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
(IN THOUSANDS EXCEPT FOR PER SHARE
INFORMATION)
<S> <C> <C> <C> <C>
Net income (loss)
applicable to common stockholders........... As reported $44,724 $(362,290) $(74,019)
Pro forma $ 9,745 (391,115) (94,650)
Net income (loss) per common share:
Basic....................................... As reported $ 0.26 $ (2.37) $ (0.49)
Pro forma $ 0.06 (2.56) (0.63)
Diluted..................................... As reported $ 0.25 $ (2.37) $ (0.49)
Pro forma $ 0.05 (2.56) (0.63)
</TABLE>

Calculated under SFAS 123, the weighted-average fair value of the options
granted during fiscal 1998, 1997 and 1996 was $3.47, $4.81 and $12.79 per share,
respectively. The weighted average fair value of employee stock purchase rights
granted under the ESPP during fiscal 1998, 1997 and 1996 were $1.91, $3.83 and
$7.47, respectively.

401(k) PLAN

The Company has a 401(k) plan covering substantially all of its U.S.
employees. Under this plan, participating employees may defer up to 15 percent
of their pre-tax earnings, subject to the Internal Revenue Service annual
contribution limits. In fiscal 1998, the Company matched 50 percent of each
employee's contribution up to a maximum of $2,000. The Company's matching
contributions to this 401(k) plan for 1998, 1997 and 1996 were $3.5 million,
$4.2 million and $3.8 million, respectively.

F-28
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 - COMMITMENTS AND CONTINGENCIES

The Company leases certain computer and office equipment under capital
leases having terms of three-to-five years. Amounts capitalized for such leases
are included on the consolidated balance sheets as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Computer and office equipment.............................. $10,023 $7,288
Less: accumulated amortization............................. 5,147 1,489
------- ------
$ 4,876 $5,799
======= ======
</TABLE>

During fiscal 1998, 1997 and 1996, the Company financed approximately $1.9
million, $10.5 million and $1.8 million, respectively, of equipment purchases
under capital lease arrangements. Amortization of the cost of leased equipment
is included in depreciation expense.

The Company leases certain of its office facilities and equipment under
non-cancelable operating leases and total rent expense was $30.7 million, $34.8
million and $42.4 million in 1998, 1997 and 1996, respectively.

In November 1996, the Company leased approximately 200,000 square feet of
office space in Santa Clara, California. The lease term is for fifteen years and
minimum lease payments amount to $96.0 million over the term. The minimum lease
payments increase within a contractual range based on changes in the Consumer
Price Index. In the fourth quarter of 1997, the Company assigned the lease to an
unrelated third party. The Company remains contingently liable for minimum lease
payments under this assignment.

Future minimum payments, by year and in the aggregate, under the capital and
non-cancelable operating leases as of December 31, 1998, are as follows:

<TABLE>
<CAPTION>
NON-CANCELABLE
YEAR ENDING DECEMBER 31 CAPITAL LEASES OPERATING LEASES
- ----------------------- -------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
1999............................................ $5,012 $30,279
2000............................................ 2,594 26,440
2001............................................ 209 19,749
2002............................................ -- 14,825
2003............................................ -- 5,805
Thereafter...................................... -- 2,552
-------
Total payments.................................. 7,815 $99,650
=======
Less: amount representing interest.............. 582
------
Present value of minimum lease payments......... 7,233
Less current portion............................ 4,685
------
$2,548
======
</TABLE>

As of December 31, 1998, the Company was contractually obligated to purchase
approximately $2.1 million of various computer equipment.

F-28
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company has several active software development and service provider
contracts with third-party technology providers. These agreements contain
financial commitments by the Company of $12.4 million, $10.2 million, $7.3
million and $2.7 million in fiscal 1999, 2000, 2001 and 2002, respectively.

NOTE 9 - BUSINESS SEGMENTS

In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which was
adopted by the Company in 1998. SFAS No. 131 requires companies to report
financial and descriptive information about its reportable operating segments,
including segment profit or loss, certain specific revenue and expense items and
segment assets, as well as information about the revenues derived from the
Company's products and services, the countries in which the Company earns
revenues and holds assets, and major customers.

The Company 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 by year:

<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE ASIA/PACIFIC AMERICA OTHER(3) TOTAL
--------- -------- ------------ -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1998:
Net revenues from unaffiliated customers............ $ 367,373 $240,964 $ 77,191 $ 49,978 $ -- $ 735,506
Transfers between segments(1)....................... (11,256) (52) 4,093 7,215 -- --
Total net revenues.................................. 356,117 240,912 81,284 57,193 -- 735,506
Operating income (loss)(2).......................... (1,281) 59,306 1,733 (7,173) 701 53,286
Interest income..................................... 9,821 873 192 842 -- 11,728
Interest expense.................................... 3,424 2,315 35 75 -- 5,849
Identifiable assets at December 31.................. 694,652 138,470 76,918 40,328 (328,303) 622,065
Depreciation and amortization expense............... 31,839 9,771 3,718 1,485 -- 46,813
Capital expenditures................................ 15,065 4,099 853 794 -- 20,811
Income tax expense (credit)......................... (1,387) 3,375 488 3,372 (1,448) 4,400
Net income (loss)................................... $ 4,364 $ 53,042 $ 1,386 $(10,733) $ 2,125 $ 50,184
</TABLE>

<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE ASIA/PACIFIC AMERICA OTHER(3) TOTAL
--------- -------- ------------ -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1997:
Net revenues from unaffiliated customers............ $ 307,870 $224,829 $ 81,130 $ 50,063 $ -- $ 663,892
Transfers between segments(1)....................... (7,147) 3,242 333 3,572 -- --
Total net revenues.................................. 300,723 228,071 81,463 53,635 -- 663,892
Operating income (loss)(2).......................... (231,542) (77,871) (48,814) 4,210 (5,436) (359,453)
Interest income..................................... 4,756 612 144 301 -- 5,813
Interest expense.................................... 3,430 4,976 209 790 -- 9,405
Identifiable assets at December 31.................. 558,253 130,174 61,875 38,948 (223,229) 566,021
Depreciation and amortization expense............... 34,325 23,238 7,023 1,108 -- 65,694
Capital expenditures................................ 71,087 15,102 6,534 1,488 -- 94,211
Income tax expense (credit)......................... 11,776 (4,763) 285 756 (237) 7,817
Net income (loss)................................... $(242,368) $(64,750) $(49,855) $ 1,833 $ (5,248) $(360,388)
</TABLE>

F-29
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 - BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE ASIA/PACIFIC AMERICA OTHER(3) TOTAL
--------- -------- ------------ -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1996:
Net revenues from unaffiliated customers............ $ 356,863 $233,224 $ 93,622 $ 50,831 $ -- $ 734,540
Transfers between segments(1)....................... (15,348) 2,646 6,156 6,546 -- --
Total net revenues.................................. 341,515 235,870 99,778 57,377 -- 734,540
Operating income (loss)(2).......................... (35,736) (20,520) (11,576) 4,693 1,352 (61,787)
Interest income..................................... 8,435 835 60 545 -- 9,875
Interest expense.................................... 7,879 4,363 233 -- 12,475
Identifiable assets at December 31.................. 736,113 218,196 101,203 44,803 (217,056) 883,259
Depreciation and amortization expense............... 24,874 11,692 9,475 1,172 -- 47,213
Capital expenditures................................ 101,809 30,030 14,505 1,975 -- 148,319
Income tax expense (credit)......................... (924) 10,933 1,114 1,109 299 12,531
Net income (loss)................................... $ (7,686) $(57,520) $(13,052) $ 3,468 $ 771 $ (74,019)
</TABLE>

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

(1) The Company makes allocations of revenue to operating segments depending on
the location of the country where the order is placed, the location of the
country where the license is installed or service is delivered, the type of
revenue (license or service) and whether the sale was through a reseller or
to an end user.

The accounting policies of the segments are the same as those described in
Note 1 - Summary of Significant Accounting Policies.

(2) Operating income/(loss) excludes the effect of transfers between segments.

(3) Represents consolidating adjustments such as elimination of intercompany
balances.

The Company's revenues are derived from licensing our database servers and
related tools and connectivity/gateway software, and performing services, which
include maintenance and consulting/training. Information as to the Company's
revenues from external customers for all reportable segments is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
License revenues.................................... $383.9 $378.2 $502.7
------ ------ ------
Service revenues
Maintenance....................................... 253.7 188.0 159.0
Consulting and training........................... 97.9 97.7 72.8
------ ------ ------
351.6 285.7 $231.8
------ ------ ------
$735.5 $663.9 $734.5
------ ------ ------
</TABLE>

F-30
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 - BUSINESS SEGMENTS (CONTINUED)

Information as to the Company's operations in different geographical areas
is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues, net of transfers between segments:
United States..................................... $356.1 $300.7 $341.4
------ ------ ------
Total North America............................... 356.1 300.7 341.4
====== ====== ======
United Kingdom.................................... 63.8 61.0 56.3
Germany........................................... 69.2 63.8 92.6
France............................................ 19.5 26.2 23.9
Italy............................................. 10.9 18.0 11.7
Spain............................................. 10.8 7.0 7.5
Other countries................................... 66.7 52.1 43.9
------ ------ ------
Total Europe...................................... 240.9 228.1 235.9
====== ====== ======
Japan............................................. 26.2 18.7 31.5
Hong Kong......................................... 10.8 16.1 19.5
China............................................. 9.7 3.4 0.5
Korea............................................. 5.6 12.4 16.7
Other countries................................... 29.0 30.9 31.6
------ ------ ------
Total Asia/Pacific................................ 81.3 81.5 99.8
====== ====== ======
Mexico............................................ 21.6 18.8 25.4
Brazil............................................ 11.3 9.2 6.6
Argentina......................................... 7.5 7.9 7.8
Other countries................................... 16.8 17.7 17.6
------ ------ ------
Total Latin America............................... 57.2 53.6 57.4
------ ------ ------
$735.5 $663.9 $734.5
====== ====== ======
</TABLE>

F-31
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 - BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Property and equipment, net
United States....................................... $57.8 $72.1 $128.2
Other............................................... 0.2 0.2 0.2
----- ----- ------
Total North America................................. 58.0 72.3 128.4
===== ===== ======
United Kingdom...................................... 2.0 3.5 13.3
Germany............................................. 3.9 3.9 11.7
France.............................................. 1.3 1.9 4.6
Ireland............................................. 1.1 1.6 2.5
Other countries..................................... 3.6 5.9 8.5
----- ----- ------
Total Europe........................................ 11.9 16.8 40.6
===== ===== ======
Asia/Pacific........................................ 3.0 4.0 14.6
Latin America....................................... 2.9 3.3 3.1
----- ----- ------
Total Asia/Pacific and Latin America................ 5.9 7.3 17.7
===== ===== ======
$75.8 $96.4 $186.7
===== ===== ======
</TABLE>

No single customer accounted for 10% or more of the consolidated revenues of
the Company in fiscal 1998, 1997 or 1996.

NOTE 10 - INCOME TAXES

The provision for income taxes applicable to income (loss) before income
taxes consists of the following:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal........................................ $ 2,690 $(2,264) $ 1,540
State.......................................... 90 -- 565
Foreign........................................ (1,357) 10,415 6,216
------- ------- -------
1,423 8,151 8,321
Deferred:
Federal........................................ (4,071) (3,857) (1,748)
State.......................................... (1,461) (189) (2,983)
Foreign........................................ 8,509 3,712 8,941
------- ------- -------
2,977 (334) 4,210
------- ------- -------
$ 4,400 $ 7,817 $12,531
------- ------- -------
</TABLE>

In 1998, 1997 and 1996, the Company recognized tax benefits related to stock
option plans of $0 million, $0 million and $14.8 million, respectively. Such
benefits were recorded as an increase to additional paid-in capital.

F-32
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10 - INCOME TAXES (CONTINUED)

Income (loss) before income taxes consists of the following:

<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................... $ 2,704 $(230,787) $ (26,964)
Foreign.................................... 51,880 (121,784) (34,524)
------- --------- ---------
$54,584 $(352,571) $ (61,488)
======= ========= =========
</TABLE>

The provision for income taxes differs from the amount computed by applying
the federal statutory income tax rate to income (loss) before income taxes. The
sources and tax effects of the differences are as follows:

<TABLE>
<CAPTION>
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- --------- -------- -------- --------
1998 1997 1996
------------------- -------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Computed tax at federal statutory rate................ $ 19,104 35.0 % $(123,400) (35.0)% $(21,521) (35.0)%
Valuation allowance................................... (11,194) (20.5)% 118,211 33.5 % 41,351 67.3 %
Research and development credits...................... -- 0.0 % -- 0.0 % (1,457) (2.4)%
State income taxes, net of federal tax benefit........ (1,372) (2.5)% -- 0.0 % (1,572) (2.6)%
Foreign withholding taxes not currently creditable.... 2,690 4.9 % -- 0.0 % -- 0.0 %
Foreign taxes, net.................................... (4,395) (8.0)% 10,415 3.0 %
Other, net............................................ (433) (0.8)% 2,591 0.7 % (4,270) (6.9)%
-------- ----- --------- ----- -------- -----
$ 4,400 8.1 % $ 7,817 2.2 % $ 12,531 20.5 %
-------- ----- --------- ----- -------- -----
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax

F-33
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10 - INCOME TAXES (CONTINUED)

purposes. Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Reserves and accrued expenses............................... $ 7,981 $ 13,457
Deferred revenue............................................ 3,381 3,626
Foreign net operating loss carryforwards.................... 43,490 74,243
Domestic net operating loss carryforwards................... 83,132 81,512
Domestic net operating loss carryback....................... -- 34,000
Foreign taxes credit........................................ 7,247 4,555
R&D credit carryforwards.................................... 22,218 15,559
Valuation of investment portfolio FAS 115................... -- 307
Other....................................................... 11,146 2,345
--------- ---------
Total deferred tax assets................................... 178,595 229,604
--------- ---------
Valuation allowance for deferred tax assets................. (162,487) (179,941)
--------- ---------
Deferred tax assets, net of valuation allowance............. 16,108 49,663
Deferred Tax Liabilities:
Capitalized software........................................ 14,130 14,051
Revenue recognition......................................... -- 1,612
Valuation of investment portfolio FAS 115................... 1,978 --
--------- ---------
Total deferred tax liabilities.............................. 16,108 15,663
--------- ---------
Net deferred tax assets..................................... $ -- $ 34,000
--------- ---------
</TABLE>

At December 31, 1998, the Company had approximately $175.3 million,
$175.3 million and $164.2 million of foreign, federal and state net operating
loss carryforwards, respectively. The foreign and state net operating loss
carryforwards expire at various dates beginning in 1999. The federal net
operating loss carryforwards expire at various dates beginning in 2007. Income
taxes paid amounted to $4.7 million, $11.3 million and $22.7 million in 1998,
1997 and 1996, respectively. The valuation allowance for deferred tax assets
decreased by $17.4 million in 1998 and increased by $133.4 million and
$41.4 million in 1997 and 1996, respectively.

Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets at December 31, 1998 will be as follows:

<TABLE>
<S> <C>
Income tax benefit from continuing operations............... $148,360
Goodwill and other noncurrent intangible assets............. 14,127
--------
Total....................................................... $162,487
========
</TABLE>

F-34
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 - BUSINESS COMBINATIONS

On October 8, 1999, the Company completed its acquisition of Cloudscape, a
privately-held provider of synchronized database solutions for the remote and
occasionally connected workforce. In the acquisition, the former shareholders of
Cloudscape received shares of the Company's Common Stock in exchange for their
shares of Cloudscape at the rate of approximately 0.56 shares of Informix Common
Stock for each share of Cloudscape Common Stock (the "Merger"). An aggregate of
9,583,000 shares of Informix Common Stock were issued pursuant to the Merger,
and an aggregate of 417,000 options and warrants to purchase Cloudscape Common
Stock were assumed by Informix.

The Merger was accounted for as a pooling-of-interests combination and,
accordingly, the supplemental consolidated financial statements for periods
prior to the combination have been restated to include the accounts and results
of operations of Cloudscape. The results of operations previously reported by
the separate enterprises and the combined amounts presented in the accompanying
supplemental consolidated financial statements are summarized below.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Net revenues:
Informix................................... $734,983 $ 663,892 $734,540
Cloudscape................................. 523 -- --
-------- --------- --------
Combined................................... $735,506 $ 663,892 $734,540
======== ========= ========

Net income (loss):
Informix................................... $ 57,718 $(356,867) $(73,565)
Cloudscape................................. (7,534) (3,521) (454)
-------- --------- --------
Combined................................... $ 50,184 $(360,388) $(74,019)
======== ========= ========
</TABLE>

No adjustments were necessary to conform accounting policies of the combined
entities.

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. Under terms of the acquisition, the Company
issued approximately 7.6 million shares of its Common Stock in exchange for all
outstanding shares of Red Brick Common Stock. In addition, the Company issued
options to purchase approximately 2.5 million shares of the Company's Common
Stock in exchange for outstanding unvested options to purchase Red Brick common
stock. The acquisition was accounted for using the purchase method of
accounting, and a summary of the purchase price for the acquisition is as
follows (in thousands):

<TABLE>
<S> <C> <C>
Stock and stock options, net of issuance costs............. $35,914
Direct acquisition costs................................... 1,042
Other liabilities assumed.................................. 5,892
Accrued merger and integration costs....................... 7,850
Deferred revenue........................................... 5,149
-------
Total...................................................... $55,847
=======
</TABLE>

F-35
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 - BUSINESS COMBINATIONS (CONTINUED)

The purchase price was allocated as follows:

<TABLE>
<S> <C> <C>
Cash and short-term investments acquired................... $ 7,763
Other tangible assets acquired............................. 10,281

Intangible assets..........................................
Capitalized software..................................... 7,400
Workforce................................................ 4,700
Goodwill................................................. 23,103
------
35,203
In-process research and development........................ 2,600
-------
Total $55,847
=======
</TABLE>

In-process research and development represents the fair value of
technologies acquired for use in the Company's own development efforts. The
Company determined the amount of the purchase price to be allocated to
in-process research and development based on an independent appraisal of certain
intangible assets which indicated that approximately $2.6 million of the
acquired intangible assets consisted of in-process research and development that
had not yet reached technological feasibility and had no alternative future
uses. Accordingly, the Company recorded a charge to operations of $2.6 million
in the fourth quarter of fiscal 1998. The remaining intangible assets acquired,
with an assigned value of approximately $35.2 million, were included in
"Intangible Assets" in the accompanying consolidated balance sheets, and are
being amortized over three to five years.

Accrued merger and integration costs included approximately $1.6 million for
severance and 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 December 31, 1998, no accrued merger and integration costs had been paid.
The Company expects to complete its termination of employees and consolidation
of facilities by the end of fiscal 1999.

The following unaudited pro forma finanacial information presents the
combined results of operations of Informix and Red Brick as if the acquisition
had occurred as of the beginning of 1998 and 1997, after giving effect to
certain adjustments, including amortization of goodwill and excluding the
write-off of acquired in-process research and development in 1998. 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>
YEAR ENDED DECEMBER 31,
-------------------------
1998 1997
--------- ---------
(IN THOUSANDS, EXCEPT FOR
PER SHARE DATA)
<S> <C> <C>
Net revenues......................................... $769,989 $707,207
Net income (loss).................................... 21,886 (385,452)
Net income (loss) per share.......................... 0.09 (2.38)
</TABLE>

F-36
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 - BUSINESS COMBINATIONS (CONTINUED)

In February 1997, the Company acquired all of the outstanding capital stock
of CenterView Software, Inc. ("CenterView"), a privately-owned company which
develops and sells software application development tools. The aggregate
purchase price paid was approximately $8.7 million, which included cash and
direct acquisition costs. The transaction has been accounted for as a purchase
and, based on an independent appraisal of the assets acquired and liabilities
assumed, the purchase price has been allocated to the net tangible and
intangible assets acquired, including developed software technology, acquired
workforce, in-process technology, and goodwill. The in-process technology, which
based on the independent appraisal has been valued at $7 million, had not, at
the date of acquisition, reached technological feasibility and had no
alternative future uses in other research and development projects.
Consequently, its value was charged to operations in the first quarter of fiscal
1997, the period the acquisition was consummated. The remaining identifiable
intangible assets are being amortized over three to five years. CenterView's
results of operations for fiscal 1996 were not material.

In February 1996, the Company acquired Illustra Information Technologies,
Inc. ("Illustra"), a company that provides dynamic content management database
software and tools for managing complex data in the Internet,
multimedia/entertainment, financial services, earth sciences and other markets.
Approximately 12.7 million shares of the Company's common stock were issued to
acquire all outstanding shares of Illustra common stock. An additional
2.3 million shares of the Company's common stock were reserved for issuance in
connection with the assumption of Illustra's outstanding stock options and
warrants. The transaction has been accounted for as a pooling of interests, and
accordingly, the consolidated financial statements for all prior periods
presented have been restated to include the accounts and operations of Illustra
as if the merger was consummated at the beginning of the earliest period
presented. Merger fees of approximately $5.9 million were recorded in the first
quarter of 1996.

NOTE 12 - 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 the 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 these derivative actions would accrue to the benefit of
the Company.

F-37
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12 - LITIGATION (CONTINUED)

insurance coverage 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 $91 million for a maximum
term of one year from the date of the final approval of the settlement by the
courts. The Company's former independent auditors, Ernst & Young LLP, will pay
$34 million in cash. The total amount of the settlement, which has received
final approval with respect to the federal class action and is pending final
state court approval with respect to the derivative and state class actions,
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 condition.

NOTE 13 - NONRECURRING CHARGES

In accordance with Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," the Company records impairment losses on long-lived
assets used in its operations when events and circumstances indicate that the
assets might be impaired and the estimated future undiscounted cash flows to be
generated by those assets are less than the assets' carrying amounts. During the
first quarter of 1997, the Company's Japanese subsidiary experienced a
significant shortfall in business activity compared to historical levels.
Accordingly, the Company evaluated the ongoing value of the subsidiary's
long-lived assets

F-38
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13 - NONRECURRING CHARGES (CONTINUED)

(primarily computer and other equipment) and goodwill. Based on this evaluation,
the Company determined that the subsidiary's assets had been impaired and wrote
them down by $30.5 million to their estimated fair values. Fair value was
determined using estimated future discounted cash flows and/or estimated resale
values as appropriate.

In February 1997, the Company acquired CenterView Software (see Note 11)
and, as a direct result, revised its database application tool business strategy
to incorporate CenterView's developed technology and "Data Director" product.
This revision to the tools business strategy significantly altered the Company's
current and future marketing plans for its own NewEra family of application
tools, including projected future NewEra product revenues. As a result, the
Company reevaluated the net realizable value of its NewEra products and found it
to be significantly below the net balance of related capitalized software
development costs. Accordingly, the Company recorded a charge during the first
quarter 1997 of $14.7 million to reduce the carrying value of these capitalized
product development costs to the revised estimated net realizable value of the
NewEra products.

In June 1997 and again in September 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 expense charge and adjustments to restructuring expense
included in the Company's consolidated statements of operations for the years
ended December 31, 1998 and 1997 as well as the significant components of the
restructuring reserve at December 31, 1998:

<TABLE>
<CAPTION>
ACCRUAL ACCRUAL
BALANCE AT BALANCE AT
RESTRUCTURING NON-CASH CASH DEC. 31, NON-CASH CASH DEC. 31,
EXPENSE COSTS PAYMENTS 1997 COSTS PAYMENTS ADJUSTMENTS 1998
------------- -------- -------- ---------- -------- -------- ----------- ----------
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1998
------------------------------------------------ ----------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Severance and
benefits........... $ 21.9 $ -- $19.5 $ 2.4 $ -- $0.1 $ 2.2 $0.1
Write-off of
assets............. 48.2 48.2 -- -- -- -- -- --
Facility charges..... 34.7 7.7 3.8 23.2 1.1 8.8 8.1 5.2
Other................ 3.4 2.2 0.2 1.0 -- 0.5 -- 0.5
------ ----- ----- ----- ---- ---- ----- ----
$108.2 $58.1 $23.5 $26.6 $1.1 $9.4 $10.3 $5.8
====== ===== ===== ===== ==== ==== ===== ====
</TABLE>

Severance and benefits represent the reduction of approximately 670
employees, primarily sales and marketing personnel, on a worldwide basis.
Temporary employees and contractors were also reduced. Write-off of assets
include the write-off or write-down in carrying value of equipment as a result
of the Company's decision to reduce the number of Information Superstores
throughout the world, as well as the write-off of equipment associated with
headcount reductions. The equipment subject to the write-offs and write-downs
consisted primarily of computer servers, workstations, and personal computers
that are no longer utilized in the Company's operations. Facility charges
include early termination costs associated with the closing of certain domestic
and international sales offices.

In fiscal 1998, the Company recorded restructuring-related adjustments to
decrease restructuring expense by $10.3 million 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

F-39
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13 - NONRECURRING CHARGES (CONTINUED)

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.

NOTE 14 - SENIOR SECURED CREDIT AGREEMENT

In December 1997, the Company entered into a Senior Secured Credit Agreement
with a syndicate of commercial banks, providing for a revolving credit facility
of up to $75 million (the "Credit Facility"). The actual amount available under
the Credit Facility, for either direct borrowings or issuances of letters of
credit, is based on certain eligibility criteria. As a result, the aggregate
amount available under the Credit Facility will vary from time to time based on
the amount and eligibility of the Company's receivables. As of December 31,
1998, no borrowings were outstanding under the Credit Facility, the Company's
net accounts receivable totaled $187 million and its borrowing base under the
Credit Facility was $61 million. The term of the Credit Facility is two years
and is secured by all of the assets of Informix Software and the capital stock
of the Company's domestic subsidiaries. The availability of the Credit Facility
is subject to the Company's compliance with certain covenants, including the
following financial covenants requiring the Company to: (a) maintain a ratio of
1.25 to 1.00 in respect of the sum of cash and accounts receivable to the
difference of current liabilities less deferred and unearned revenues, (b)
maintain quarterly revenues of $154 million, (c) maintain quarterly operating
profit of at least $14.5 million for the quarter ended December 31, 1998 and a
quarterly operating profit of at least $3 million for the quarter ending March
31, 1999 and a quarterly operating profit of at least $15 million for the
quarter ending June 30, 1999 and thereafter, (d) maintain a positive quarterly
cash flow consisting of operating income which does not include any restated
revenue resulting from the Company's November 1997 restatement of its financial
statements, capitalized software costs, capital expenditures or cash outlays in
respect of accrued expenses arising from restructuring charges (but which income
figure does take into account depreciation and amortization expenses), (e)
maintain an interest coverage ratio of 1.25 to 1.00 in respect of quarterly
operating cash flow to interest expense plus scheduled amortization of debt, (f)
refrain from making additional investments in fixed or capital assets, in any
fiscal year, in excess of $30 million, plus any carry forward amount which carry
forward amount cannot exceed $5.0 million, and (g) obtain permission from the
lenders before entering into any merger, consolidation, reorganization or other
transaction resulting in a fundamental change.

For the quarter ended December 31, 1998, the Company exceeded its investment
in capital assets allowed by the loan agreement and its subsequent amendments.
However, the banks waived the compliance of the capital expenditures covenant
for the quarter in an amendment to the loan agreement made prior to December 31,
1998. There is no assurance that the Company will be able to meet its
obligations under the amended loan agreement.

NOTE 15 - COMPREHENSIVE INCOME (LOSS)

On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income" which establishes
standards for displaying comprehensive income and its components.

F-40
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15 - COMPREHENSIVE INCOME (LOSS) (CONTINUED)

The components of accumulated other comprehensive income (loss) consist of
the following items:

<TABLE>
<CAPTION>
ACCUMULATED
UNREALIZED OTHER
FOREIGN GAINS/(LOSSES) ON COMPREHENSIVE
CURRENCY SECURITIES INCOME/(LOSS)
-------- ----------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
December 31, 1995..................................... $ (6,343) $ 4,064 $ (2,279)
Current-period change................................. (3,838) 7,626 3,788
-------- -------- --------
December 31, 1996..................................... (10,181) 11,690 1,509
Current-period change................................. (955) (12,457) (13,412)
-------- -------- --------
December 31, 1997..................................... (11,136) (767) (11,903)
Current-period change................................. 3,351 5,202 8,553
-------- -------- --------
December 31, 1998..................................... $ (7,785) $ 4,435 $ (3,350)
-------- -------- --------
</TABLE>

The tax effect on components of comprehensive income (loss) is not
significant.

NOTE 16 - 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 nine month period ended September 30, 1999.

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 is effective for fiscal years beginning after June 15,
1999. Earlier application of SFAS 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 clarified the specification of what was 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.

F-41
<PAGE>
INFORMIX CORPORATION

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 136,230 $ 185,459
Short-term investments.................................... 79,701 41,093
Accounts receivable, net.................................. 184,382 187,342
Recoverable income taxes.................................. -- 3,255
Other current assets...................................... 30,227 20,373
--------- ---------
Total current assets........................................ 430,540 437,522
PROPERTY AND EQUIPMENT, net................................. 62,772 75,845
SOFTWARE COSTS, net......................................... 39,214 38,006
LONG-TERM INVESTMENTS....................................... 14,092 22,191
INTANGIBLE ASSETS, net...................................... 32,046 41,482
OTHER ASSETS................................................ 4,656 7,019
--------- ---------
Total Assets................................................ $ 583,320 $ 622,065
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 18,011 $ 29,900
Accrued expenses.......................................... 50,463 59,558
Accrued employee compensation............................. 55,139 50,649
Deferred revenue.......................................... 135,198 132,390
Advances from customers and financial institutions........ 53,148 121,077
Accrued restructuring costs............................... 2,289 5,813
Other current liabilities................................. 4,459 6,875
--------- ---------
Total current liabilities................................... 318,707 406,262
OTHER NON-CURRENT LIABILITIES............................... 2,090 3,759
STOCKHOLDERS' EQUITY
Preferred stock........................................... 63 63
Common stock.............................................. 1,950 1,913
Shares to be issued for litigation settlement............. 91,000 --
Additional paid-in capital................................ 458,223 445,352
Accumulated deficit....................................... (283,848) (231,934)
Accumulated other comprehensive loss...................... (4,865) (3,350)
--------- ---------
Total stockholders' equity.................................. 262,523 212,044
--------- ---------
Total Liabilities and Stockholders' Equity.................. $ 583,320 $ 622,065
========= =========
</TABLE>

See Notes to Supplemental Unaudited Condensed Consolidated Financial Statements.

F-42
<PAGE>
INFORMIX CORPORATION

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
NET REVENUES
Licenses.................................................. $307,562 $265,870
Services.................................................. 312,862 254,717
-------- --------
620,424 520,587
COSTS AND EXPENSES
Cost of software distribution............................. 31,304 26,662
Cost of services.......................................... 131,634 113,904
Sales and marketing....................................... 230,987 196,094
Research and development.................................. 120,464 110,071
General and administrative................................ 57,987 51,162
Restructuring charges..................................... (578) (7,255)
-------- --------
571,798 490,638
-------- --------
Operating income............................................ 48,626 29,949

OTHER INCOME (EXPENSE)
Interest income........................................... 8,005 6,613
Interest expense.......................................... (3,300) (4,636)
Litigation settlement expense............................. (97,016) --
Other, net................................................ 245 (2,396)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (43,440) 29,530
Income taxes.............................................. 10,494 1,900
-------- --------
NET INCOME (LOSS)........................................... (53,934) 27,630
Preferred stock dividend.................................. (829) (1,816)
Value assigned to warrants................................ -- (1,982)
-------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS......... $(54,763) $ 23,832
======== ========
NET INCOME (LOSS) PER COMMON SHARE
Basic....................................................... $ (0.28) $ 0.14
======== ========
Diluted..................................................... $ (0.28) $ 0.13
======== ========
SHARES USED IN PER SHARE CALCULATIONS
Basic....................................................... 195,930 166,917
======== ========
Diluted..................................................... 195,930 180,359
======== ========
</TABLE>

See Notes to Supplemental Unaudited Condensed Consolidated Financial Statements.

F-43
<PAGE>
INFORMIX CORPORATION

SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $(53,934) $ 27,630
Adjustments to reconcile net income (loss) to net cash and
cash equivalents provided by (used in) operating
activities:
License fees received in advance........................ (64,439) (48,561)
Depreciation and amortization........................... 35,623 35,449
Amortization of capitalized software.................... 13,937 15,841
Write-off of capitalized software....................... 2,371 771
Litigation settlement................................... 91,000 --
Gain on sale of marketable securities................... (2,118) 880
(Gain) loss on disposal of property and equipment....... (263) 1,736
Provisions for losses on accounts receivable............ 561 (5,569)
Restructuring charges................................... (578) (7,255)
Other................................................... (1,187) 893
Changes in operating assets and liabilities:
Accounts receivable................................... 6,636 (8,656)
Other current assets.................................. (4,150) 3,273
Accounts payable, accrued expenses and other
liabilities......................................... (19,542) (57,618)
Deferred maintenance revenue.......................... (2,088) 12,720
-------- --------
Net cash and cash equivalents provided by (used in)
operating activities...................................... 1,829 (28,466)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments of excess cash:
Purchases of available-for-sale securities............ (80,936) (30,798)
Maturities of available-for-sale securities........... 19,329 5,119
Sales of available-for-sale securities................ 30,530 24,300
Proceeds from sale of strategic investments and marketable
securities.............................................. 4,340 1,500
Purchases of strategic investments........................ -- (1,000)
Purchases of property and equipment....................... (17,708) (13,755)
Additions to software costs............................... (17,516) (13,728)
Other..................................................... 1,040 454
-------- --------
Net cash and cash equivalents used in investing
activities................................................ (60,921) (27,908)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from customers................................... 5,183 10,092
Proceeds from issuance of common stock, net............... 13,910 12,809
Proceeds from issuance of preferred stock, net............ -- 24,119
Payments for structured settlements with resellers........ (3,225) --
Principal payments on capital leases...................... (4,300) (3,349)
Net borrowings under line of credit....................... 935 501
-------- --------
Net cash and cash equivalents provided by financing
activities................................................ 12,503 44,172
-------- --------
ADJUSTMENT TO CONFORM FISCAL YEAR OF POOLED COMPANY......... (733) --
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (1,908) 16,247
-------- --------
Increase (decrease) in cash and cash equivalents............ (49,230) 4,045
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 185,460 141,559
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $136,230 $145,604
======== ========
</TABLE>

See Notes to Supplemental Unaudited Condensed Consolidated Financial Statements.

F-44
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The supplemental unaudited condensed consolidated financial statements have
been prepared to give retroactive effect to the merger with Cloudscape on
October 8, 1999. The supplemental unaudited condensed consolidated financial
statements have been restated for all periods presented as if Cloudscape and the
Company had always been combined. Generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling-of-interests method in financial statements that do not include the
date of consummation. These supplemental financial statements do not extend
through the date of consummation; however, they will become the historical
consolidated financial statements of the Company after financial statements
covering the date of consummation of the business combination are issued.

The supplemental unaudited condensed consolidated financial statements have
been prepared on the same basis as the audited supplemental consolidated
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 supplemental unaudited information should be
read in conjunction with the audited supplemental financial statements of the
Company and the notes thereto for the year ended December 31, 1998 included in
Item 5. of this Form 8-K.

F-45
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

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>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Numerator:
Net income (loss)...................................... $(53,934) $27,630
Preferred stock dividend............................... (829) (1,816)
Value assigned to warrants............................. -- (1,982)
-------- -------
$(54,763) $23,832
======== =======
Denominator:
Denominator for basic net income (loss) per common
share--
Weighted-average shares outstanding.................. 191,710 166,917
Weighted-average shares to be issued for litigation
settlement......................................... 4,220 --
-------- -------
195,930 166,917
======== =======
Effect of dilutive securities:
Employee stock options and restricted common stock... -- 4,829
Series A-1 convertible preferred stock and series A-1
warrants........................................... -- 2,999
Cloudscape Convertible Preferred Stock............... -- 5,614
-------- -------

Denominator for diluted net income (loss) per common
share--adjusted weighted-average shares and assumed
conversions.......................................... 195,930 180,359
======== =======
Basic net income (loss) per common share................. $ (0.28) $ 0.14
======== =======
Diluted net income (loss) per common share............... $ (0.28) $ 0.13
======== =======
</TABLE>

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 September 30, 1999 follows (in thousands):

<TABLE>
<S> <C>
Potential dilutive securities:
Stock options and restricted common stock................. 20,568
Common Stock Warrants (Series B Warrants)................. 1,750
Cloudscape Convertible Preferred Stock.................... 6,343
Contingently issuable shares for litigation settlement.... 2,383
</TABLE>

F-46
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

NOTE B--NET INCOME (LOSS) PER SHARE (CONTINUED)

The stock options have per share exercise prices ranging from $0.07 to
$42.09 and are exercisable through September 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 1,620,000 have been issued as of
September 30, 1999, at a per share exercise price of $7.84. The Series B
Warrants are exercisable through November 2002.

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. In the event that the
average price of the Company's Common Stock fails to average $10.11 over certain
specified periods after the Common Stock is issued, the Company is required to
contribute cash and/or issue additional shares of its Common Stock. Based on the
average closing price of the Company's Common Stock for the final twenty trading
days ending September 30, 1999, the Company would potentially be required to
issue an additional 2,383,000 shares of Common Stock pursuant to the memorandum
of understanding. Because the Company has a net loss for the nine-month period
ended September 30, 1999, the denominator for the Company's net loss per common
share calculation for such period excludes these shares of potentially-issuable
Common Stock.

NOTE C--COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net income (loss)........................................ $(53,934) $27,630
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale
securities............................................. (431) 3,851
Foreign currency translation adjustment.................. (1,084) 4,828
-------- -------
$(55,449) $36,309
======== =======
</TABLE>

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

NOTE D--STOCKHOLDERS' EQUITY

During the three months and nine months ended September 30, 1999, holders of
the Company's Series B Preferred Stock converted 2,000 shares and 4,300 shares,
respectively, of Series B Preferred Stock into 283,364 shares and 626,393
shares, respectively, of the Company's Common Stock. In connection with

F-47
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

NOTE D--STOCKHOLDERS' EQUITY (CONTINUED)

such conversions, the Company also issued such Series B Preferred Stockholders
warrants to purchase up to 56,672 shares and 125,276 shares, respectively, of
Common Stock at a purchase price of $7.84 per share.

<TABLE>
<S> <C>
Reconciliation of outstanding Common Stock shares (in
thousands):
Shares outstanding at December 31, 1998................... 191,244
Shares issued upon exercises of stock options............. 2,105
Shares sold and issued under the employee stock purchase
plan.................................................... 921
Shares issued upon conversion of Series B Preferred
Stock................................................... 626
Shares to be issued for litigation settlement............. 9,000
Shares issued for services................................ 17
-------
Shares outstanding at September 30, 1999.................. 203,913
=======
</TABLE>

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 September 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 0.2 1.3
Non-cash costs.............................................. -- 1.0 0.6 1.6
Adjustments................................................. 0.1 0.8 (0.3) 0.6
---- ---- ----- ----
Accrual balances, September 30, 1999........................ $ -- $2.3 $ -- $2.3
==== ==== ===== ====
</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.

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

F-48
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

NOTE F--BUSINESS SEGMENTS (CONTINUED)

Company's North America, Europe, Asia/Pacific and Latin America operating
segments is summarized below for the nine-month periods ended September 30, 1999
and 1998:

<TABLE>
<CAPTION>
NORTH ASIA LATIN
NINE MONTHS ENDED SEPTEMBER 30, AMERICA EUROPE PACIFIC AMERICA ELIMINATIONS TOTAL
- ------------------------------- -------- -------- -------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1999:
Net revenues from unaffiliated
customers............................. $321,445 $184,970 $66,798 $47,211 $ -- $620,424
Transfers between segments.............. (25,994) 15,626 5,914 4,454 -- --
Total net revenues...................... 295,451 200,596 72,712 51,665 -- 620,424
Operating income........................ 16,338 18,213 8,280 4,657 1,138 48,626
Net income (loss)....................... (69,675) 15,487 7,443 (1,933) (5,256) (53,934)

1998:
Net revenues from unaffiliated
customers............................. $259,261 $169,544 $57,672 $34,110 $ -- $520,587
Transfers between segments.............. (7,282) (304) 2,789 4,797 -- --
Total net revenues...................... 251,979 169,240 60,461 38,907 -- 520,587
Operating income (loss)................. (34,857) 67,751 880 1,460 (5,285) 29,949
Net income (loss)....................... (31,270) 64,475 759 (1,410) (4,924) 27,630
</TABLE>

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.

F-49
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

NOTE G--LITIGATION (CONTINUED)

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 $91 million for a maximum
term of one year from the date of the 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 has received
final approval with respect to the federal class action and is pending final
state court approval with respect to the derivative and state class actions,
will be $142 million.

NOTE H--BUSINESS COMBINATIONS

On October 8, 1999, the Company completed its acquisition of Cloudscape,
Inc., ("Cloudscape"), a privately-held provider of synchronized database
solutions for the remote and occasionally connected workforce. In the
acquisition, the former shareholders of Cloudscape received shares of the
Company's Common Stock in exchange for their shares of Cloudscape at the rate of
approximately 0.56 shares of Informix Common Stock for each share of Cloudscape
Common Stock (the "Merger"). An aggregate of 9,583,000 shares of Informix Common
Stock were issued pursuant to the Merger, and an aggregate of 417,000 options
and warrants to purchase Cloudscape Common Stock were assumed by Informix.
Immediately prior to the Cloudscape Merger, the outstanding shares of Cloudscape
Preferred Stock were converted into Cloudscape Common Stock.

F-50
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

NOTE H--BUSINESS COMBINATIONS (CONTINUED)

separate enterprises and the combined amounts presented in the accompanying
supplemental consolidated financial statements are summarized below.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net revenues:
Informix.............................................. $619,207 $520,411
Cloudscape............................................ 1,217 176
-------- --------
Combined.............................................. $620,424 $520,587
======== ========

Net income (loss):
Informix.............................................. $(47,605) $ 33,144
Cloudscape............................................ (6,329) (5,514)
-------- --------
Combined.............................................. $(53,934) $ 27,630
======== ========
</TABLE>

No adjustments were necessary to conform accounting policies of the combined
entities.

Prior to the combination, Cloudscape's fiscal year ended March 31. In
recording the pooling-of-interests combination, Informix's statement of
operations for the nine-month period ended September 30, 1999 has been combined
with the Cloudscape statement of operations for the same period. The Informix
statement of operations for the nine-month period ended September 30, 1998 has
been combined with the Cloudscape statement of operations for the nine-month
period ended December 31, 1998. Informix's statement of operations for the years
ended December 31, 1998 and 1997 have been combined with the Cloudscape
statements of operations for the years ended March 31, 1999 and 1998,
respectively. The Informix statement of operations for the year ended December
31, 1996 has been combined with the Cloudscape statement of operations for the
period from August 2, 1996 (inception) through March 31, 1997. This presentation
is in accordance with the rules and regulations of the Securities and Exchange
Commission (SEC) which require that the fiscal periods combined in the
supplemental consolidated financial statements be within 93 days of Informix's
fiscal period ends. As a consequence, the results of Cloudscape for the
three-month period ended March 31, 1999 are included in the results of
operations for both the year ended December 31, 1998 and the nine-month period
ended September 30, 1999. Cloudscape revenues and net loss for the three-month
period ended March 31, 1999 were $347,000 and $2,020,000, respectively. The
supplemental consolidated balance sheets of Informix at September 30, 1999 and
December 31, 1998 have been combined with the balance sheets of Cloudscape as of
September 30, 1999 and March 31, 1999, respectively.

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 September 30, 1999, $1.1 million had been paid
for severance and other acquisition-related costs, $1.3 million had been paid
for costs associated with the shutdown and consolidation of Red Brick facilities
and $0.8 million had been paid to settle acquired royalty

F-51
<PAGE>
INFORMIX CORPORATION

NOTES TO SUPPLEMENTAL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

NOTE H--BUSINESS COMBINATIONS (CONTINUED)

commitments for abandoned technology. 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 nine-month
period ended September 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
SEPTEMBER 30,
1998
--------------
NINE MONTHS
--------------
<S> <C>
Net revenues................................................ $545,743
Net income (loss) applicable to common stockholders......... 2,736
Net income (loss) per share................................. 0.02
</TABLE>

NOTE I--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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 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.

F-52