INFORMIX CORP, 10-Q, 2000-08-14

INFORMIX CORP
10-Q, 2000-08-14
PREPACKAGED SOFTWARE

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000.

--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.

COMMISSION FILE NUMBER 0-15325

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

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

YES /X/ NO
----- -----

At July 31, 2000, 283,953,749 shares of the Registrant's Common Stock were
outstanding.

===============================================================================
<PAGE>

INFORMIX CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 2000
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Financial Statements

Unaudited Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 2000 and 1999................... 3

Unaudited Condensed Consolidated Balance Sheets
as of June 30, 2000 and December 31, 1999.......................................... 4

Unaudited Condensed Consolidated Statements of Cash Flows
for the three months and six months ended June 30, 2000 and 1999................... 5

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

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................ 15

Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................. 31

PART II. OTHER INFORMATION

Item 1. Legal Proceedings....................................................................... 33

Item 2. Changes in Securities and Use of Proceeds............................................... 33

Item 3. Defaults Upon Senior Securities......................................................... 33

Item 4. Submission of Matters to a Vote of Security Holders..................................... 33

Item 5. Other Information....................................................................... 34

Item 6. Exhibits and Reports on Form 8-K........................................................ 34

Signatures....................................................................................... 35
</TABLE>

FORWARD LOOKING STATEMENTS

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

<PAGE>

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

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

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES
Licenses ......................................... $ 101,536 $ 126,264 $ 220,815 $ 241,781
Services ......................................... 138,958 124,359 270,563 236,373
----------- ----------- ----------- -----------
240,494 250,623 491,378 478,154
COSTS AND EXPENSES
Cost of software distribution..................... 13,478 11,030 26,063 21,972
Cost of services.................................. 48,052 52,749 96,784 103,913
Sales and marketing............................... 108,009 92,214 206,807 181,495
Research and development.......................... 43,707 47,349 87,062 92,199
General and administrative........................ 25,570 22,860 45,814 43,257
Write-off of acquired research and development.... -- 5,052 -- 5,052
Merger, integration and restructuring charges..... -- 9,895 50,034 9,317
----------- ----------- ----------- -----------
238,816 241,149 512,564 457,205
----------- ----------- ----------- -----------
Operating income..................................... 1,678 9,474 (21,186) 20,949

OTHER INCOME (EXPENSE)
Interest income................................... 3,808 2,782 7,110 5,893
Interest expense.................................. (137) (1,048) (308) (2,290)
Litigation settlement expense..................... -- (97,016) -- (97,016)
Other, net........................................ 924 882 4,437 (599)
----------- ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES.................... 6,273 (84,926) (9,947) (73,063)
Income taxes...................................... 1,255 4,733 8,018 8,653
----------- ----------- ----------- -----------
NET INCOME (LOSS).................................... 5,018 (89,659) (17,965) (81,716)
Preferred stock dividend.......................... (89) (279) (176) (582)
----------- ----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS................................ $ 4,929 $ (89,938) $ (18,141) $ (82,298)
=========== =========== =========== ===========

NET INCOME (LOSS) PER COMMON SHARE
Basic................................................ $ 0.02 $ (0.35) $ (0.06) $ (0.33)
=========== =========== =========== ===========
Diluted.............................................. $ 0.02 $ (0.35) $ (0.06) $ (0.33)
=========== =========== =========== ===========

SHARES USED IN PER SHARE CALCULATIONS
Basic................................................ 286,967 257,818 285,293 251,796
=========== =========== =========== ===========
Diluted.............................................. 301,947 257,818 285,293 251,796
=========== =========== =========== ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.

3
<PAGE>

INFORMIX CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................... $ 204,516 $ 170,118
Short-term investments......................................................... 100,304 102,469
Accounts receivable, net....................................................... 254,565 266,647
Recoverable income taxes....................................................... 5,544 5,544
Other current assets........................................................... 22,253 38,056
----------- -----------
Total current assets.............................................................. 587,182 582,834

PROPERTY AND EQUIPMENT, net....................................................... 71,917 68,581
SOFTWARE COSTS, net............................................................... 50,722 45,722
LONG-TERM INVESTMENTS............................................................. 18,677 17,272
INTANGIBLE ASSETS, net............................................................ 68,621 77,537
OTHER ASSETS...................................................................... 16,104 16,536
----------- -----------
Total Assets...................................................................... $ 813,223 $ 808,482
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable............................................................... $ 34,518 $ 30,694
Accrued expenses............................................................... 52,181 58,740
Accrued employee compensation.................................................. 56,368 70,875
Income taxes payable........................................................... 26,704 21,803
Deferred revenue............................................................... 163,358 156,182
Advances from customers........................................................ 25,106 34,302
Accrued merger and restructuring costs......................................... 24,688 8,675
Other current liabilities...................................................... 941 3,878
----------- -----------
Total current liabilities......................................................... 383,864 385,149

OTHER NON-CURRENT LIABILITIES..................................................... 1,562 1,420

STOCKHOLDERS' EQUITY
Common stock................................................................... 2,826 2,756
Shares to be issued for litigation settlement.................................. 61,228 61,228
Additional paid-in capital..................................................... 663,374 632,743
Accumulated deficit............................................................ (283,088) (265,123)
Treasury stock................................................................. (3,081) (3,163)
Accumulated other comprehensive loss........................................... (13,462) (6,528)
----------- -----------
Total stockholders' equity........................................................ 427,797 421,913
----------- -----------
Total Liabilities and Stockholders' Equity........................................ $ 813,223 $ 808,482
=========== ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.

4
<PAGE>

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

<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................................................... $(17,965) $(81,716)
Adjustments to reconcile net loss to net cash and cash equivalents
provided by (used in) operating activities:
License fees received in advance.................................................. (16,339) (43,287)
Depreciation and amortization..................................................... 29,292 35,211
Amortization of capitalized software.............................................. 11,606 9,746
Litigation settlement............................................................. -- 91,000
Foreign currency transaction gains................................................ (860) (162)
Gain on sales of marketable securities............................................ (2,895) (1,110)
Loss on disposal of property and equipment........................................ 1,725 6,055
Deferred tax expense.............................................................. -- 1,462
Non-cash merger, integration and restructuring charges............................ 5,418 (578)
Other............................................................................. 908 237
Changes in operating assets and liabilities:
Accounts receivable............................................................. 15,604 (11,851)
Other current assets............................................................ 9,222 (5,694)
Accounts payable, accrued expenses and other liabilities........................ 112 (20,123)
Deferred maintenance revenue.................................................... 4,504 20,694
-------- --------
Net cash and cash equivalents provided by (used in) operating activities.............. 40,332 (116)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments of excess cash:
Purchases of available-for-sale securities...................................... (68,979) (67,849)
Maturities of available-for-sale securities..................................... 44,032 9,102
Sales of available-for-sale securities.......................................... 27,033 27,286
Purchases of non-marketable equity securities...................................... (5,500) --
Proceeds from sales of marketable equity securities................................ 5,130 1,832
Purchases of property and equipment................................................ (24,718) (13,567)
Additions to software costs........................................................ (16,606) (13,247)
Business combinations, net of cash acquired........................................ -- 1,285
Other.............................................................................. 1,345 58
-------- --------
Net cash and cash equivalents used in investing activities............................ (38,263) (55,100)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from customers............................................................ 6,399 3,061
Proceeds from issuance of common stock, net........................................ 30,549 15,801
Payments for structured settlements with resellers................................. (129) (2,510)
Principal payments on capital leases............................................... (1,392) (3,184)
-------- --------
Net cash and cash equivalents provided by financing activities........................ 35,427 13,168
-------- --------
ADJUSTMENT TO CONFORM FISCAL YEAR OF POOLED COMPANY................................... -- (731)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.......................... (3,098) (3,966)
-------- --------
Increase (decrease) in cash and cash equivalents...................................... 34,398 (46,745)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................................... 170,118 209,626
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................ $204,516 $162,881
======== ========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.

5
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements
have been prepared on the same basis as the audited financial statements. In the
opinion of management, all significant adjustments which are normal, recurring
in nature and necessary for a fair presentation of the financial position and
results of the operations of the Company, have been consistently recorded. The
operating results for the interim periods presented are not necessarily
indicative of expected performance for the entire year. Certain previously
reported amounts have been reclassified to conform to the current presentation
format. The unaudited information should be read in conjunction with the audited
financial statements of the Company and the notes thereto for the year ended
December 31, 1999 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.

On March 1, 2000, the Company acquired Ardent Software, Inc. ("Ardent")
in a transaction that has been accounted for as a pooling of interests and
therefore all historical financial information has been restated to include the
historical information of Ardent.

NOTE B - NET INCOME (LOSS) PER SHARE

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

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss)................................. $ 5,018 $ (89,659) $ (17,965) $ (81,716)
Preferred stock dividend.......................... (89) (279) (176) (582)
----------- ----------- ----------- -----------
$ 4,929 $ (89,938) $ (18,141) $ (82,298)
=========== =========== =========== ===========
Denominator:
Denominator for basic net income (loss)
per common share -
Weighted-average shares outstanding............ 280,911 254,258 279,237 250,006
Weighted-average shares to be issued
for litigation settlement................... 6,056 3,560 6,056 1,790
----------- ----------- ----------- -----------
286,967 257,818 285,293 251,796
=========== =========== =========== ===========
Effect of dilutive securities:
Employee stock options......................... 14,351 -- -- --
Common stock warrants.......................... 552 -- --
Cloudscape restricted common stock............. 77 -- -- --
----------- ----------- ----------- -----------
Denominator for diluted net income (loss)
per common share -
Adjusted weighted-average shares
and assumed conversions..................... 301,947 257,818 285,293 251,796
=========== =========== =========== ===========

Basic net income (loss) per common share............... $ 0.02 $ (0.35) $ (0.06) $ (0.33)
=========== =========== =========== ===========
Diluted net income (loss) per common share............. $ 0.02 $ (0.35) $ (0.06) $ (0.33)
=========== =========== =========== ===========
</TABLE>

The Company excluded potentially dilutive securities for each period
presented from its diluted net income (loss) per share computation because
either the exercise price of the securities exceeded the average fair value of
the

6
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company's Common Stock or the Company had net losses and, therefore, these
securities were anti-dilutive. A summary of the excluded potential dilutive
securities and the related exercise/conversion features for the three-month
period ended June 30, 2000 follows (in thousands):

<TABLE>
<S> <C>
Potential dilutive securities:
Stock options................................................ 5,639

Series B Convertible Preferred Stock......................... 7
</TABLE>

The stock options have per share exercise prices ranging from $10.50 to $33.25
and are exercisable through April 2010.

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. All 7,000 remaining
shares of Series B Convertible Preferred Stock were converted into shares of
Common Stock in July 2000. (For more information see Note J - Subsequent Events)

NOTE C - COMPREHENSIVE INCOME

The following table sets forth the calculation of other comprehensive
income (loss), net of taxes, for the three-month and six-month periods ended
June 30, 2000 and 1999 (in thousands):

NOTE D - STOCKHOLDERS' EQUITY

<TABLE>
<S> <C>
Reconciliation of outstanding shares (in thousands):
Shares outstanding at December 31, 1999........................ 275,594
Shares issued upon exercises of stock options.................. 5,971
Shares sold and issued to employees under ESPP................. 830
Shares issued upon exercises of warrants....................... 412
Shares repurchased under Cloudscape repurchase agreements...... (138)
---------
Shares outstanding at June 30, 2000............................ 282,669
=========
</TABLE>

7
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE E - BUSINESS COMBINATIONS

On March 1, 2000, the Company completed its acquisition of Ardent, a
leading provider of data integration infrastructure software for data warehouse,
business intelligence, and e-business applications. In the acquisition, the
former shareholders of Ardent received 3.5 shares of the Company's common stock
in exchange for each outstanding Ardent share (the "Merger"). An aggregate of
70,437,000 shares of Informix common stock were issued pursuant to the Merger,
and an aggregate of 17,174,000 options to purchase Ardent common stock were
assumed by Informix. The Merger was accounted for as a pooling-of-interests
combination and, accordingly, the consolidated financial statements for periods
prior to the combination have been restated to include the accounts and results
of operations of Ardent and all intercompany transactions have been eliminated.

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. The acquisition of Cloudscape was
accounted for as a pooling-of-interests combination and, accordingly, the
consolidated financial statements for the 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 pooled enterprises
and the combined amounts presented in the accompanying consolidated financial
statements are summarized below (in thousands):

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
------------------ ----------------
<S> <C> <C>
Net revenues:
Informix............................. $ 206,758 $ 403,356
Ardent............................... 43,415 74,002
Cloudscape........................... 450 796
---------------- ---------------
Combined............................. $ 250,623 $ 478,154
================ ===============

Net income (loss):
Informix............................. $ (79,265) $ (71,719)
Ardent............................... (8,206) (5,789)
Cloudscape........................... (2,188) (4,208)
---------------- ---------------
Combined............................. $ (89,659) $ (81,716)
================ ===============
</TABLE>

NOTE F - ACCRUED MERGER AND RESTRUCTURING CHARGES

In connection with the merger with Ardent, the Company recorded a
charge of $50.0 million for merger, integration and restructuring costs, of
which $39.9 million was for accrued merger and restructuring costs and the
remaining $10.1 million was for integration and transition costs incurred during
the period ended March 31, 2000. This amount included $14.5 million for
financial advisor, legal and accounting fees related to the merger, $15.1
million for severance and employment related costs associated with the
termination of approximately 206 employees who held overlapping positions, $6.8
million for the closure of facilities and equipment costs associated with
combining the operations of the two companies and $3.5 million for the write-off
of redundant technology and other duplicate costs. The Company has made
adjustments to the categories and timing of expected restructure spending based
on revised estimates. Those revisions resulted in an increase of $0.5 million
for severance and employment related costs to $15.6 million and a reduction of
$0.5 million for the write-off of redundant technology and other duplicate costs
to $3.0 million. As of June 30, 2000, the following amounts had been paid or
charged against the liability: $9.3 million had been paid for financial advisor,
legal and accounting fees and the remainder is expected to be paid by the end of
2000, $5.1 million had been paid for severance and employment related costs upon
the termination of approximately all employees

8
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

in accordance with the plan and the remaining payments are to be made through
March 2001, $2.5 million had been incurred for facilities and equipment costs
which extend through 2005, and $2.8 million had been incurred for the write-off
of redundant technology and other duplicate costs which will be completely
utilized by the end of 2000. As of June 30, 2000, $20.2 million remained as a
liability in the financial statements.

As part of the Company's acquisition of Cloudscape, the Company
recorded a charge of $2.8 million for accrued merger and restructuring costs.
This amount included $1.2 million for financial advisor, legal and accounting
fees related to the merger and $1.6 million for costs associated with combining
the operations of the two companies including expenditures of $0.7 million for
severance and related costs, $0.4 million for closure of facilities and $0.5
million for the write-off of redundant assets and other costs. As of June 30,
2000, approximately $0.4 million remained as a liability in the financial
statements and related primarily to the closure of facilities, which is expected
to be utilized by the end of 2000.

On April 26, 1999, Ardent acquired Prism Solutions, Inc. ("Prism"), a
provider of data warehouse management software that assists customers in
developing, managing and maintaining data warehouses. In connection with the
merger with Prism, Ardent recorded a charge of $9.7 million for accrued merger
and restructuring costs. The accrual included approximately $2.9 million for
professional fees and other acquisition-related costs, $3.5 million for
severance and related benefits and $3.3 million for costs associated with the
shutdown and consolidation of Prism facilities. As of June 30, 2000,
approximately $1.9 million remained unpaid and comprised principally of future
rental obligations on idle facilities which run through 2005.

In May of 1999, Ardent adopted a formal plan to exit the operations of
O2 Technologies, Inc., which had been acquired by Ardent in December of 1997,
and recorded a charge of $9.9 million for accrued restructuring charges. The
charge was comprised of $5.9 million for asset impairment, $3.6 million for
severance and related costs and $0.4 million for facility closings and other
obligations. As of June 30, 2000, approximately $0.5 million remained unpaid and
was comprised principally of severance and related benefits and rental
obligations on idle facilities, all of which is expected to be paid in 2000.

On December 31, 1998, the Company acquired Red Brick Systems, Inc.
("Red Brick"). Accrued merger and restructuring costs recorded in connection
with the acquisition of Red Brick included approximately $1.6 million for
severance and other acquisition-related costs, $4.7 million for costs associated
with the shutdown and consolidation of the Red Brick facilities and $1.6 million
for costs associated with settling acquired royalty commitments for abandoned
technology. As of June 30, 2000, approximately $0.9 million remained unpaid, of
which $0.8 million related to future rental obligations on idle facilities that
extend through 2002 and $0.1 million related to royalty commitments to be paid
during the third quarter of 2000.

In June 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. As of June 30, 2000, approximately $0.8 million remained
unpaid and related primarily to rental obligations as 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 G - BUSINESS SEGMENTS

In recent years, the Company has operated under four reportable
operating segments which report to the Company's president and chief executive
officer, (the "Chief Operating Decision Maker"). These reportable operating
segments, North America, Europe, Asia/Pacific and Latin America, are organized,
managed and analyzed geographically and operate in one

9
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

industry segment: the development and marketing of information management
software and related services. The Company has evaluated operating segment
performance based primarily on net revenues and certain operating expenses. The
Company's products are marketed internationally through the Company's
subsidiaries and through application resellers, OEMs and distributors. Financial
information for the Company's North America, Europe, Asia/Pacific and Latin
America operating segments is summarized below for the three-month and six-month
periods ended June 30, 2000 and 1999:

<TABLE>
<CAPTION>
Three months ended North Asia Latin
June 30, America Europe Pacific America Eliminations Total
------------------------------- ----------- ----------- ----------- ----------- ------------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
2000:
----
Net revenues from
unaffiliated customers....... $ 129,778 $ 66,391 $ 26,069 $ 18,256 $ -- $240,494
Transfers between segments..... (8,701) 4,130 2,921 1,650 -- --
Total net revenues............. 121,077 70,521 28,990 19,906 -- 240,494
Operating income (loss)........ (21,968) 21,083 981 1,545 37 1,678
Net income (loss).............. $ (15,857) $ 16,210 $ (1,287) $ 668 $ 5,284 $ 5,018

1999:
----
Net revenues from
unaffiliated customers....... $ 133,934 $ 75,567 $ 25,856 $ 15,266 $ -- $250,623
Transfers between segments..... (6,381) 3,467 1,529 1,385 -- --
Total net revenues............. 127,553 79,034 27,385 16,651 -- 250,623
Operating income (loss)........ (11,157) 17,248 223 1,276 1,884 9,474
Net income (loss).............. $(107,006) $ 16,652 $ 233 $ (199) $ 661 $(89,659)

<CAPTION>
Six months ended North Asia Latin
June 30, America Europe Pacific America Eliminations Total
------------------------------- ----------- ----------- ----------- ----------- ------------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
2000:
----
Net revenues from
unaffiliated customers....... $ 260,041 $ 147,173 $ 51,614 $ 32,550 $ -- $491,378
Transfers between segments..... (15,469) 5,097 7,387 2,985 -- --
Total net revenues............. 244,572 152,270 59,001 35,535 -- 491,378
Operating income (loss)........ (66,927) 37,532 5,695 2,365 149 (21,186)
Net income (loss).............. $ (58,590) $ 33,029 $ 4,984 $ 5,633 $ (3,021) $(17,965)

1999:
----
Net revenues from
unaffiliated customers....... $ 256,061 $ 144,221 $ 49,545 $ 28,327 $ -- $478,154
Transfers between segments..... (12,485) 5,981 3,823 2,681 -- --
Total net revenues............. 243,576 150,202 53,368 31,008 -- 478,154
Operating income (loss)........ (16,178) 29,819 4,426 294 2,588 20,949
Net income (loss).............. $(108,065) $ 27,351 $ 4,162 $ (4,517) $ (647) $(81,716)
</TABLE>

On October 1, 1999, the Company created four new business groups
which began reporting to the Company's Chief Operating Decision Maker: 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

10
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

responsible for delivering Internet-based solutions for electronic commerce;
and the i.Intelligence Business Group, which is responsible for delivering
Internet-based data warehouse and business intelligence products and
solutions. Net revenues for the Company's TransAct, i.Foundation, i.Informix
and i.Intelligence business groups is summarized below for the three-month
and six-month periods ended June 30, 2000 and 1999 (in thousands):

On August 1, 2000, the four business groups were consolidated into two
business groups that more effectively capture the Company's current operations:
Database Business Operations and Solutions Business Operations. Net revenues for
the Database and Solutions Business Operations are summarized below for the
three-month and six-month periods ended June 30, 2000 and 1999 (in thousands):

NOTE H - 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 named as defendants the Company, certain of its
present and former officers and directors and, in some cases, its former
independent auditors. The complaints alleged various violations of the federal
securities laws and sought 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 alleged various violations of state law, any
monetary judgments in these 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

11
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 the directors' and officers' 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.

In October and November, 1999, state and federal courts granted final
approval of a settlement agreed to by the Company and the other parties to the
various private securities and related litigation against the Company (the
"Settlement"). The Settlement resolved 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 Settlement, 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 9.0 million shares of the Company's common
stock, which will have a guaranteed value of $91.0 million for a maximum term of
one year from the date of the final approval of the settlement by the courts.
The first distribution of shares of the Company's common stock occurred in
November and December 1999 when the Company issued approximately 2.9 million
shares to the plaintiff's counsel. The Company will issue the remainder of the
shares to be issued under the Settlement after the claims administrator notifies
the Company that it has processed all of the claims submitted by class members.
The Company's former independent auditors, Ernst & Young LLP, will pay $34.0
million in cash. The total amount of the Settlement will be $142.0 million.

EXPO 2000 filed an action against Informix Software GmbH (the Company's
German subsidiary) in the Hanover (Germany) district court in September 1998
seeking recovery of approximately $6.0 million, plus interest, for breach of a
sponsorship contract signed in 1997. Informix Software GmbH filed a counterclaim
for breach of contract and seeks recovery of approximately $3.1 million. In
August 1999, the court entered a judgment against Informix Software GmbH in the
amount of approximately $6.0 million, although approximately $2.1 million of
judgment is conditioned upon the return by EXPO 2000 of certain software.
Informix Software GmbH has filed an appeal. The Company has reserved $2.2
million for the expected outcome of the appeal.

On February 3, 2000, International Business Machines Corporation
("IBM") filed an action against the Company in the United States District Court
for the District of Delaware alleging infringement of six United States patents
owned by IBM. In the complaints, IBM seeks against the Company, and the Company
seeks against IBM, permanent injunctions against further alleged infringement,
unspecified compensatory damages, unspecified treble damages, and interest,
costs and attorneys' fees. On March 28, 2000, the Company filed an answer and
counterclaims in the United States District Court for the District of Delaware
against IBM denying IBM's allegations of patent infringement and alleging
infringement by IBM of four United States patents owned by the Company. In
addition, on March 28, 2000, the Company filed a separate action against IBM in
the United States District Court for the Northern District of California
alleging infringement of four other United States patents owned by the Company.
On June 22, 2000, that action was transferred to the United States District
Court for the District of Delaware. The Company strongly believes that the
allegations in IBM's complaint are without merit and intends to defend the
action vigorously.

Ardent is a defendant in actions filed against Unidata prior to its
merger with Ardent, one in May 1996 in the U.S. District Court for the Western
District of Washington, and one in September 1996 in the U.S. District Court for
the District of Colorado. The plaintiff, a company controlled by a former
stockholder of Unidata and a distributor of its products in certain parts of
Asia, alleges in both actions the improper distribution of certain Unidata
products in the plaintiff's exclusive territory and asserts damages of
approximately $30.0 million under claims for fraud, breach of contract, unfair
competition, racketeering and corruption, and trademark and copyright
infringement, among other relief.

12
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unidata denied the allegations against it in its answers to the complaints. In
the Colorado action, Unidata moved that the matter be resolved by arbitration in
accordance with its distribution agreement with the plaintiff. In May 1999, the
U.S. District Court for the District of Colorado issued an order compelling
arbitration. An arbitration hearing regarding the Colorado action is currently
underway. Discovery has not commenced in the Washington action, pending the
outcome of the Colorado arbitration. In addition, it is likely that Unidata will
be joined in an action against an end-user in China arising out of the same
facts at issue in the U.S. actions against Unidata. It is possible that either
Ardent or the Company will also be joined in the proceedings in China. While the
outcome cannot be predicted with certainty, the Company believes that the
actions against Ardent are without merit and plans to continue to oppose them
vigorously.

In July 2000, the Company agreed to pay to Cincom Systems, Inc.
("Cincom") $3.0 million to reimburse Cincom for operating expenses of CinMark, a
joint venture entered into by Ardent and Cincom in 1996 to develop the Object
Studio product, and $4.0 million as a fee to license the Object Studio
technology. This agreement resolves all claims and counterclaims asserted by
both Cincom and Ardent. As of June 30, 2000, the Company had $3.0 million
reserved as a liability in our financial statements for the Cincom litigation.

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 I - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards 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, 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 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, "Revenue Recognition," ("SAB No. 101") to
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements; however, SAB No. 101 does not change existing literature
on revenue recognition. SAB No. 101 explains the staff's general framework for
revenue recognition, stating that four criteria need to be met in order to
recognize revenue. The four criteria, all of which must be met, are the
following:

- There must be persuasive evidence of an arrangement,
- Delivery must have occurred or services must have been rendered,
- The selling price must be fixed or determinable, and
- Collectibility must be reasonably assured

The SEC has recently indicated that it intends to issue further
guidance with respect to the adoption of specific issues addressed by SAB No.
101. Until such time as this additional guidance is issued, the Company is
unable to assess the impact, if any, that it may have on its financial condition
or results of operations.

The FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB Opinion No.
25" ("FIN No. 44") in March 2000. The Interpretation clarifies the application
of Opinion 25 for only certain issues such as the following: (a) the definition
of employee for purposes of applying

13
<PAGE>

INFORMIX CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. FIN No.
44 is effective July 1, 2000. Management does not believe that the
interpretation will have a material effect on the Company's results of
operations, financial position or liquidity.

In March 2000, the Emerging Issues Task Force ("EITF") issued EITF No.
00-2, "Accounting for Web Site Development Costs." EITF No. 00-2 establishes
accounting and reporting standards for capitalization of web site development
costs in accordance with Statement of Position No. 98-1. EITF No. 00-2 is
effective for web site development costs incurred for fiscal quarters beginning
after June 30, 2000. The Company is currently evaluating whether the adoption of
this EITF will have a material impact on the results of operations.

NOTE J - SUBSEQUENT EVENTS

On August 9, 2000, the Company announced management and
organizational changes, including the consolidation of its existing business
groups into two operational groups: DataBase Business Operations and
Solutions Business Operations. In connection with these organizational
changes, the Company also announced that, based on currently available
information, it expects to take a charge up to $90 million in the third
quarter ending September 30, 2000. The charge will primarily relate to costs
associated with the elimination of functions and facilities that have become
redundant under the new corporate structure as well as to selected intangible
assets. Included as part of the planned elimination of functions and
facilities is the relocation of the Company's corporate headquarters from
Menlo Park, California to Westboro, Massachusetts, the immediate reduction of
approximately 500 positions from the Company's current staffing levels, the
movement of certain engineering groups to new and existing Company facilities
in Northern California and the relocation of certain internal support and
back-office functions to the Company's facility in Lenexa, Kansas.

On August 9, 2000, the Company announced authorization by its Board
of Directors to repurchase up to 6.4 million shares of the Company's Common
Stock.

Subsequent to June 30, 2000, the sole remaining holder of the Company's
Series B Preferred Stock converted all 7,000 shares of the Company's remaining
Series B Preferred Stock into 1,630,751 shares of the Company's Common Stock. In
connection with this conversion, the Company also issued this Series B Preferred
Stockholder a warrant to purchase up to 326,150 shares of Common Stock at a
purchase price of $7.84 per share and paid cash dividends, which were previously
accrued, in the amount of $932,055 to this stockholder.

14
<PAGE>

ITEM 2. 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 COMPANY'S FUTURE FINANCIAL PERFORMANCE, WHICH INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH UNDER "FACTORS THAT MAY AFFECT FUTURE RESULTS," AND
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.

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

OVERVIEW

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

- Object-relational and 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

Our software solutions include high performance online transaction
processing applications, data warehouse and business intelligence applications,
and dynamic web/content management applications. We offer complete database
solutions by building strategic relationships with application, hardware, and
systems integration providers. Our solutions are used in many industries,
including retail, telecommunications, financial services, healthcare,
pharmaceutical/biochemistry, manufacturing, and media and publishing.

On March 1, 2000, we acquired Ardent Software, Inc. ("Ardent"), a
leading provider of data integration infrastructure software for data warehouse,
business intelligence, and e-business applications. In the acquisition, the
former shareholders of Ardent received 3.5 shares of our common stock in
exchange for each outstanding Ardent share and Informix assumed all outstanding
Ardent options and warrants. The transaction has been accounted for as a pooling
of interests and therefore all historical financial information has been
restated to include the historical information of Ardent. We believe the
acquisition of Ardent will enhance our ability to deliver complete, integrated
software solutions for data processing, data movement and analysis in electronic
commerce.

15
<PAGE>

RESULTS OF OPERATIONS

The following table and discussion compares the results of operations
for the three-month and six-month periods ended June 30, 2000 and 1999,
respectively.

<TABLE>
<CAPTION>
Percent of Net Revenues
------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES
Licenses.......................................... 42% 50% 45% 51%
Services.......................................... 58 50 55 49
---- ----- ---- ----
100 100 100 100
COSTS AND EXPENSES
Cost of software distribution..................... 6 4 5 5
Cost of services.................................. 20 21 20 22
Sales and marketing............................... 45 37 42 38
Research and development.......................... 18 19 18 19
General and administrative........................ 10 9 9 9
Write-off of acquired research and development.... -- 2 -- 1
Merger, integration and restructuring charges..... -- 4 10 2
---- ----- ---- ----
99 96 104 96
---- ----- ---- ----
Operating income (loss).............................. 1 4 (4) 4

OTHER INCOME (EXPENSE)
Interest income................................... 2 1 1 1
Interest expense.................................. -- -- -- --
Litigation settlement expense..................... -- (39) -- (20)
Other, net........................................ -- -- 1 --
---- ----- ---- ----
INCOME (LOSS) BEFORE INCOME TAXES 3 (34) (2) (15)
Income taxes...................................... 1 2 2 2
---- ----- ---- ----
NET INCOME (LOSS).................................... 2% (36)% (4)% (17)%
==== ===== ==== ====
</TABLE>

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). License revenues decreased 20%
during the second quarter of 2000 and 9% during the first half of 2000 as
contrasted with the corresponding periods in 1999. The decrease in license
revenue was due in large part to a significant decline in license revenue
derived from our traditional client-server database products and our data
warehouse and business intelligence products. License revenue from these
products declined 36% to $141.1 million during the six-month period ended June
30, 2000 from $221.0 million during the same period in 1999. We believe that
this decline is attributable to slower market demand throughout the industry for
traditional database client-server products and disruptions in our sales and
field marketing organizations due to a number of factors, including attrition
and turnover in senior and mid-level sales management personnel, the
reorganization to four distinct business groups and delays encountered in
integrating Ardent's operations and products into our sales, product marketing
and

16
<PAGE>

general operations. The decline is also attributable, in part, to the
continuing decrease of license revenues as a percentage of our total revenue.
Although we expect this latter trend to continue, we are unable to predict
whether market demand for our traditional client-server products and our data
warehouse and business intelligence products will rebound in future quarters or
whether our license revenues will continue to decline in absolute dollars.

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 in advance of revenue being recognized are recorded as a liability in
"advances from customers" in our financial statements. Advances in the amount of
$25.1 million and $34.3 million had not been recognized as earned revenue as of
June 30, 2000 and December 31, 1999, respectively. During the quarter ended June
30, 2000, we received $3.7 million in customer advances and recognized revenue
from resellers with previously recorded customer advances of $7.4 million.
Included in the $7.4 million recognized were $3.7 million of licenses which were
resold or utilized by the reseller, $3.1 million related to contractual
reductions in customer advances and $0.6 million related to previously-deferred
revenue for solution sales which has now been recognized as services have been
completed.

Contractual reductions result from settlements between us and resellers
in which the customer advance contractually expires or a settlement is
structured wherein the rights to resell our products terminate without sell
through or deployment of the software. As of June 30, 2000, there is one
reseller with remaining rights to resell a total of $1.1 million of our
products, which will be utilized by the end of 2001 pursuant to the minimum
future reduction terms of the settlement.

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

SERVICE REVENUES. Service revenues are comprised of maintenance, consulting and
training revenues. Service revenues for the quarter ended June 30, 2000
increased $14.6 million, or 12%, to $139.0 million from $124.4 million for the
same period in 1999. During the first half of 2000, service revenues increased
$34.2 million, or 14%, to $270.6 million from $236.4 million for the same period
in 1999. Service revenues accounted for 58% and 50% of net revenues in the
second quarters of 2000 and 1999, respectively, and accounted for 55% and 49% of
net revenues during the first half of 2000 and 1999, respectively. The
continuing trend of an increase in service revenues as a percentage of total
revenues reflects the fact that service revenues have grown at a faster pace
than license revenues and that license revenues have declined during 2000. The
increase in service revenues, both in absolute dollars and as a percentage of
total revenues, was attributable primarily to 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. During the first half of 2000, maintenance
revenues increased 22% to $208.6 million from $171.4 million for the same period
in 1999 while consulting and training revenues decreased slightly to $61.9
million for the six-month period ended June 30, 2000 from $65.0 million for the
same period in 1999.

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 $2.5 million to $13.5 million for the second quarter of 2000 from
$11.0 million for the same period in 1999. During the first half of 2000, cost
of software distribution increased $4.1 million to $26.1 million from $22.0
million for the same period in 1999. The increase in cost of software
distribution was

17
<PAGE>

primarily due to an increase in royalties related to new product offerings in
our web and business intelligence markets. Amortization of capitalized software
remained relatively consistent with the prior year periods.

COST OF SERVICES. Cost of services consists primarily of maintenance, consulting
and training expenses. Cost of services decreased approximately 9% to $48.1
million for the first quarter of 2000 and decreased 7% to $96.8 million during
the first half of 2000 when compared to the corresponding periods in 1999.
Service margins increased to 65% and 64% during the three and six-month periods
ended June 30, 2000 respectively, from 58% and 56% achieved during the same
periods of 1999. The decrease in absolute dollars and as a percentage of net
service revenues is primarily due to higher margins in the web and business
intelligence solutions deliveries as compared to traditional database service
deliveries.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist primarily of
salaries, commissions, marketing and communications programs and related
overhead costs. Sales and marketing expenses increased 17% to $108.0 million
during the first quarter of 2000 and increased 14% to $206.8 million during the
first half of 2000 when compared to the same periods in 1999. These increases
were due primarily to increased marketing costs for advertising and marketing
programs focused on promoting our Internet-based electronic commerce and
business intelligence products and solutions.

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 for the three and six-month
periods ended June 30, 2000 were $43.7 million and $87.1 million respectively,
or 18% of net revenues, compared to $47.3 million and $92.2 million, or 19% of
net revenues, for the corresponding periods of 1999. The decrease in research
and development expenses in absolute dollars and as a percentage of net revenues
during 2000 was attributable primarily to an increase in the amount of product
development expenditures capitalized during 2000 when compared to same periods
in 1999. A higher percentage of total research and development expenditures have
been capitalized during 2000 when compared to 1999 due to an increase in the
number of new product offerings primarily in the web and business intelligence
markets as well as the latest versions of our Informix Dynamic Server products,
which have not yet been commercially released.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist
primarily of finance, legal, information systems, human resources, bad debt
expense and related overhead costs. During the second quarter of 2000, general
and administrative expenses increased to $25.6 million from $22.9 million during
the same period in 1999. The increase in general and administrative expenses was
caused primarily by integration and transition costs related to the merger with
Ardent as well as increased legal expenses arising from the settlement of the
Cincom lawsuit against Ardent and increased professional services fees incurred
during the quarter ended June 30, 2000. During the first half of 2000 and 1999,
general and administrative expenses remained consistent at 9% of net revenues.

WRITE-OFF OF ACQUIRED RESEARCH AND DEVELOPMENT. In connection with Ardent's
acquisition of Prism on April 26, 1999, Ardent recorded a charge of
approximately $5.1 million, or 6.6% of the $76.4 million in total consideration
and liabilities assumed, for in-process research and development expense that
had not yet reached technological feasibility and had no alternative future
uses.

MERGER, INTEGRATION AND RESTRUCTURING CHARGES. During the first quarter of 2000,
we recorded a charge of $50.0 million associated with the merger with Ardent. Of
this amount, approximately $10.1 million related to integration and transition
costs incurred during the quarter ended March 31, 2000. Also included in the
$50.0 million was approximately $39.9 million of accrued merger and
restructuring costs which consisted of the following components: $14.5 million
for financial advisor, legal and accounting fees related to the merger; $15.1
million for severance and employment related costs; $6.8 million for the closure
of facilities and equipment costs and $3.5 million for the write-off of
redundant technology and other duplicate costs.

In May of 1999, Ardent adopted a formal plan to exit the operations of
O2 Technologies, Inc., which had been acquired by Ardent in December 1997, and
recorded a charge of $9.9 million for accrued restructuring charges. The charge
was comprised of $5.9 million for asset impairment, $3.6 million for severance
and related costs and $0.4 million for facility closings and other obligations.

18
<PAGE>

During the first quarter of 1999, an adjustment of $0.6 million was
recorded to the results of operations, which appears as a credit to merger,
integration and restructuring charges in our financial statements, to adjust the
estimated severance and facility components of the 1997 restructuring charge to
actual costs incurred. (See Note F to the Consolidated Financial Statements)

OTHER INCOME (EXPENSE)

INTEREST INCOME. Interest income for the first half of 2000 increased to $7.1
million from $5.9 million for the same period in 1999 due to an increase in the
average interest-bearing cash and short-term investment balances in 2000
provided by increased operating cash flows.

INTEREST EXPENSE. Interest expense decreased to $0.3 million for the six-month
period ended June 30, 2000 from $2.3 million for the same period in 1999 due
primarily to a decline in interest charges related to the line of credit which
was terminated effective December 31, 1999.

OTHER INCOME (EXPENSE), NET. Other income (expense), net increased from a net
expense of approximately $0.6 million for the first half of 1999 to other
income, net of $4.4 million for the first half of 2000. During the six-month
period ended June 30, 2000, other income included approximately $2.9 million of
net realized gains on the sale of long-term investments and approximately 0.8
million of net foreign currency transaction gains. During the six-month period
ended June 30, 1999, other expense of $0.6 million was primarily a result of
foreign currency transaction losses that were realized in the Latin America
region due primarily to the devaluation of the Brazilian Real.

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

INCOME TAXES

During the first half of 2000 and 1999, income tax expense resulted
from foreign withholding taxes and taxable earnings in certain foreign
jurisdictions where we have fully utilized our net operating loss carryforwards.
The effective tax rate for the quarter ended June 30, 2000 was 20%. We expect
the effective tax rate to increase gradually over time as we continue to fully
utilize our net operating loss carryforwards in various jurisdictions.

19
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
As of or for the
Six Months Ended
June 30,
-----------------
2000 1999
------ ------
(In millions)
<S> <C> <C>
Cash, cash equivalents, and short-term investments.................. $304.8 $243.1
Working capital..................................................... $203.3 $ 94.4
Cash and cash equivalents provided by (used for) operations......... $ 40.3 $ (0.1)
Cash and cash equivalents used for investment activities............ $(38.3) $(55.1)
Cash and cash equivalents provided by financing activities.......... $ 35.4 $ 13.2
</TABLE>

OPERATING CASH FLOWS. We generated positive cash flows from operations
totaling $40.3 million for the six-month period ended June 30, 2000, primarily
from improved operating profitability, excluding merger, integration and
restructuring charges related to our merger with Ardent. Also contributing to
the increase in operating cash flows was a reduction in the effect on cash flows
of a change in operating assets and liabilities.

INVESTING CASH FLOWS. During the first half of 2000, we decreased the
amount of cash used in investing activities by approximately $16.8 million when
compared to the same period in 1999. The decrease in cash used for investing
activities was primarily due to a decrease in our net investment of excess cash
of approximately $33.5 million and an increase in the proceeds received from
sales of marketable securities of $5.1 million offset by an increase in the
purchase of strategic investments of $5.5 million and an increase in capital
expenditures of $11.2 million.

FINANCING CASH FLOWS. Cash and cash equivalents provided by financing
activities during the six-month period ended June 30, 2000 increased by
approximately $22.2 million when compared to the same period in 1999. This
increase was due primarily to an increase in the proceeds from the sale of our
common stock through the exercise of stock options and purchases under our
Employee Stock Purchase Plan.

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.

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

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

RECENT DEVELOPMENTS

On August 9, 2000, the Company announced authorization by its Board
of Directors to repurchase up to 6.4 million shares of the Company's
Common Stock.

FACTORS THAT MAY AFFECT FUTURE RESULTS

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS CAUSED BY MANY
FACTORS, WHICH COULD RESULT IN OUR FAILING TO ACHIEVE REVENUE OR PROFITABILITY
EXPECTATIONS.

Our quarterly and annual results of operations have varied significantly in
the past and are likely to continue to vary in the future due to a number of
factors described below and elsewhere in this "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" section, many of
which are beyond our control. Any one or more of the factors listed below or
other factors could cause us to fail to achieve our revenue or profitability
expectations. In particular, the failure to meet market expectations could cause
a sharp drop in our stock price. These factors include:

- Changes in demand for our products and services, including changes
in growth rates in the industry as a whole and in the traditional
database market in particular,

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

- Adjustments of delivery schedules to accommodate customer or
regulatory requirements,

- The budgeting cycles of our customers and potential customers,

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

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

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

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

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

OUR COMMON STOCK HAS BEEN AND LIKELY WILL CONTINUE TO BE SUBJECT TO SUBSTANTIAL
PRICE AND VOLUME FLUCTUATIONS WHICH MAY PREVENT STOCKHOLDERS FROM RESELLING
THEIR SHARES AT OR ABOVE THE PRICE AT WHICH THEY PURCHASED THEIR SHARES.

Fluctuations in the price and trading volume of our common stock may
prevent stockholders from reselling their shares above the price at which they
purchased their shares. Stock prices and trading volumes for many software
companies fluctuate widely for a number of reasons, including some reasons which
may be unrelated to their businesses or results of operations. This market
volatility, as well as general domestic or international economic, market and
political conditions, could materially adversely affect the market price of our
common stock without regard to our operating performance. In addition, as
occurred in the quarter ended June 30, 2000, our operating results may be below
the expectations of public market analysts and investors. If this were to occur
again, the market price of our common stock would likely decrease significantly
again. The market price of our common stock has fluctuated significantly in the
past and may continue to fluctuate significantly because of:

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<PAGE>

- Market uncertainty about the company's business prospects or the
prospects for the relational database management systems ("RDBMS")
and object-relational database management systems ("ORDBMS")
markets in general,

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

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

- General business conditions in the software industry.

RECENT ORGANIZATIONAL CHANGES COULD DISRUPT OUR BUSINESS OPERATIONS, ADVERSELY
AFFECT OUR ABILITY TO RETAIN A NECESSARY NUMBER OF EMPLOYEES AND ADVERSELY
AFFECT THE SALES OF OUR PRODUCTS.

On October 1, 1999, we reorganized our operating business divisions
into four new business groups. On August 1, 2000, we consolidated these four
business groups into two new operational groups: Database Business Operations
and Solutions Business Operations. In addition, on August 9, 2000, we announced
plans to further reorganize and restructure our business operations. We will
accomplish the reorganization and restructuring by consolidating certain
functions, eliminating some positions, relocating our current corporate
headquarters from Menlo Park, California to Westboro, Massachusetts and moving
certain engineering groups to other facilities.

We may not achieve the anticipated benefits of this reorganization and
restructuring. Moreover, the reorganization and restructuring may cause
significant disruptions of our current business operations, including the loss
of key personnel and other employees necessary for us to effectively operate our
business. For instance, we may be unable to replace engineers who are unwilling
to move to different facilities or other employees who are unwilling to relocate
to Massachusetts. These and other disruptions or operational difficulties
related to the reorganization and restructuring may result in delays in product
development cycles or in the delivery of critical corporate support functions,
such as providing accurate and timely financial projections and reporting. The
occurrence of one or more of these factors could distract our management team,
cause uncertainty and confusion among our customers and materially adversely
affect our business and financial results.

IF THE RDBMS AND THE ORDBMS MARKETS DO NOT GROW OR DECLINE, WE MAY SELL FEWER
PRODUCTS.

If the growth rates for the relational and object-relational database
management systems, or RDBMS or ORDBMS, respectively, decline for any reason,
there will be less demand for our products, which would have a negative impact
on our business and financial results. In particular, we cannot predict whether
the sharp decline in revenue derived from licenses of these products during the
quarter ended June 30, 2000 will continue. If it does, our financial results
will continue to be materially adversely affected.

Delays in market acceptance of our ORDBMS products could result in
fewer product sales. In recent years, the types and quantities of data required
to be stored and managed has grown increasingly complex and includes, in
addition to conventional character data, audio, video, text and
three-dimensional graphics in a high-performance scaleable environment. We have
invested substantial resources in developing our ORDBMS product line. The market
for ORDBMS products is new and evolving, and its growth depends upon a growing
need to store and manage complex data and upon broader market acceptance of our
products as a solution for this need. Organizations may not choose to make the
transition from conventional RDBMS products to ORDBMS products.

WE HAVE EXPERIENCED, AND MAY CONTINUE TO EXPERIENCE, TURNOVER AT OUR SENIOR
MANAGEMENT LEVELS, WHICH COULD HARM OUR BUSINESS AND OPERATIONS.

Over the past year a number of our senior executive officers have been
replaced. In particular, Peter Gyenes

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<PAGE>

replaced Jean-Yves Dexmier as our President and Chief Executive Officer
effective July 12, 2000. Because of this continuing turnover among our senior
management, our management team has not worked together for a significant length
of time and may not be able to successfully implement our business strategies.
If the management team is unable to accomplish our business objectives, it could
materially adversely affect our ability to grow our business.

In addition, we do not maintain key man life insurance on our employees
and have no plans to do so. The loss of the services of one or more of our
current senior executive officers or key employees could harm our business and
could affect our ability to successfully implement our business objectives. Our
future success will depend to a significant extent on the continued service of
our current senior executives. If we were to lose the services of one or more of
our current senior executives or key employees, this could adversely affect our
ability to grow our business and achieve our business objectives, particularly
if one or more of those executives or key employees decided to join a competitor
or otherwise compete directly or indirectly with us.

CONTINUING DIFFICULTIES INTEGRATING ARDENT MAY PREVENT US FROM REALIZING THE
BENEFITS OF THE MERGER.

We have encountered difficulties integrating Ardent's operations and
personnel. Integration difficulties may continue to disrupt the combined
company's business and could prevent the achievement of the anticipated benefits
of the merger. In addition, the continued disruption in our sales force may
result in a loss of current customers or the inability to close sales with
potential customers.

WE MAY NOT BE ABLE TO RETAIN OUR KEY PERSONNEL OR TO INTEGRATE AND RETAIN
ARDENT'S KEY PERSONNEL, WHICH MAY PREVENT US FROM MEETING OUR BUSINESS
OBJECTIVES.

We may not be able to retain our key personnel, including certain
sales, consulting, technical and marketing personnel, or attract other qualified
personnel in the future. In addition, we may not be able to retain Ardent's key
personnel. Our success depends upon the continued service of key qualified
personnel. The competition to attract, retain and motivate these personnel is
intense. We have at times experienced, and continue to experience, difficulty
recruiting qualified software, customer support and other personnel. The loss of
such key personnel could result in our inability to effectively develop, market
and sell our products thereby harming our financial results.

INTENSE COMPETITION COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS OR
GROW OUR BUSINESS.

We may not be able to compete successfully against current and/or
future competitors and such inability could impair our ability to sell our
products. The market for our products is highly competitive, diverse and is
subject to rapid change. Moreover, we expect that the technology for database
products generally, and, in particular, the technology underlying database
solutions and products for the Internet and data warehousing products, will
continue to change rapidly. For example, as customers embrace the Internet, we
need to develop and enhance our software solutions to support Internet
applications. It is possible that our products will be rendered obsolete by
technological advances. In addition, it is possible that demand for our
traditional database products may decline sharply as customers demand more
comprehensive software solutions.

We currently face competition from a number of sources, including
several large vendors that develop and market databases, applications,
development tools, decision support products, consulting services and/or
complete database-driven solutions for the Internet. Our principal competitors
include Computer Associates, IBM, Microsoft, NCR/Teradata, Oracle and Sybase.
Additionally, as we expand our business in the markets of data warehousing and
Web/e-commerce, we expect to compete with a different group of companies,
including small, highly-focused companies offering single products or services
that we include as part of an overall solution. A number of our competitors have
significantly greater financial, technical, marketing and other resources than
we have. As a result, these competitors may be able to respond more quickly to
new or emerging technologies, evolving markets and changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products than we can.

IF THE INTERNET DOES NOT DEVELOP AS A MARKET FOR OUR PRODUCT OFFERINGS, WE MAY
NOT BE ABLE TO GROW OUR BUSINESS.

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<PAGE>

The Internet is a rapidly evolving market. We are unable to predict
whether and to what extent Internet computing and electronic commerce will be
embraced by consumers and traditional businesses. Our successful introduction of
database-driven products and solutions for the Internet market will depend in
large measure on:

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

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

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

In addition, if a sufficient number of vendors do not undertake a
commitment to the market, the market may not accept Internet computing or
Internet computing may not generate significant revenues for our business.
Also, standards for network protocols, as well as other industry-adopted and
de facto standards for the Internet, are evolving rapidly. There can be no
assurance that standards we have chosen will position our products to compete
effectively for business opportunities as they arise on the Internet. The
widespread acceptance and adoption of the Internet by traditional businesses
for conducting business and exchanging information is likely only if the
Internet provides these businesses with greater efficiencies and
improvements. The failure of the Internet to continue to develop as a
commercial or business medium could materially adversely affect our business.
Even if the Internet and electronic commerce are widely accepted and adopted
by consumers and businesses, our database products and database-driven
solutions for the Internet may not succeed. This market is new to our product
development, marketing and sales organizations. We may not be able to market
and sell products and solutions in this market successfully. In addition, our
database products and database-driven solutions for the Internet may not
compete effectively with our competitors' products and solutions. Further, we
may not generate significant revenue and/or margin in this market. Any of
these events could materially, adversely affect our business, operating
results and financial condition.

IF THE DATA WAREHOUSE MARKET DOES NOT CONTINUE TO GROW, OR IF OUR PRODUCT
OFFERINGS IN THIS MARKET ARE NOT ACCEPTED, WE MAY NOT BE ABLE TO SELL OUR
PRODUCTS OR GROW OUR BUSINESS.

The data warehouse market may not continue to grow, or may not grow
rapidly, and our customers may not expand their use of data warehouse products.
In addition, we may not be able to market and sell our products and solutions in
this market or otherwise compete effectively and generate significant revenue.
Although demand for data warehouse software has grown in recent years, the
market is still emerging. Our future financial performance in this area will
depend to a large extent on:

- Continued growth in the number of organizations adopting data
warehouses,

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

- Existing customers expanding their use of data warehouses.

CERTAIN RESELLERS MAY NOT CONTINUE TO SELL OUR PRODUCTS AND UTILIZE LICENSE FEES
PREVIOUSLY PAID TO US AND RECORDED IN OUR FINANCIAL STATEMENTS AS CUSTOMER
ADVANCES.

If these resellers do not continue to resell our products, it could
result in decreased revenue and adversely effect our operating results. 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 in
advance of revenue being recognized are recorded as a liability in "advances
from customers" in our financial statements. Advances in the amount of $25.1
million had not been recognized as earned revenue as of June 30,

24
<PAGE>

2000. Unless these resellers continue to sell our products, we will not be able
to recognize the unearned revenue from the advances from customers. In addition,
because these resellers do not provide royalty reports to us until after the end
of each fiscal quarter, we are unable to predict the level of sales to be
expected in any given fiscal quarter.

COMPETITION MAY AFFECT THE PRICING OF OUR PRODUCTS OR SERVICES, AND CHANGES IN
PRODUCT MIX MAY OCCUR, EITHER OF WHICH MAY REDUCE OUR MARGINS.

Existing and future competition or changes in our product or service
pricing structure or product or service offerings could result in an immediate
reduction in the prices of our products or services. Also, a significant change
in the mix of software products and services that we sell, including the mix
between higher margin software and maintenance products and lower margin
consulting and training, could materially adversely affect our operating results
for future quarters. Additionally, if significant price reductions in our
products or services were to occur and not be offset by increases in sales
volume, our operating margins would be adversely affected. Also, new or enhanced
products by existing competitors or new competitors could result in greater
price pressure on both our products.

In addition, the following factors could affect the pricing of
relational database management solutions products and related products:

- The industry movement to new operating systems, like Windows NT,
Linux and other low-cost operating systems available through other
appliances,

- Access to relational database management solutions and products
through desktop computers,

- Access to database-driven solutions, including ORDBMS products,
through the Internet,

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

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

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

IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S EVOLVING TECHNOLOGY STANDARDS
OR DO NOT CONTINUE TO MEET THE SOPHISTICATED NEEDS OF OUR CUSTOMERS, SALES OF
OUR SOLUTION OR PRODUCTS MAY DECLINE.

Our future success will depend on our ability to address the
increasingly sophisticated needs of our customers by supporting existing and
emerging hardware, software, database and networking platforms. We will have to
develop and introduce commercially viable enhancements to our existing products
and solutions on a timely basis to keep pace with technological developments,
evolving industry standards and changing customer requirements. If we do not
enhance our products to meet these evolving needs, we will not sell as many
products and our position in existing, emerging or potential markets could be
eroded rapidly by product advances. In addition, commercial acceptance of our
products and services could also be adversely affected by critical or negative
statements or reports by brokerage firms, industry and financial analysts and
industry periodicals about Informix, its products or business, or by the
advertising or marketing efforts of competitors, or by other factors that could
adversely affect consumer perception.

Our product development efforts will continue to require substantial
financial and operational investment. We may not have sufficient resources to
make the necessary investment or to attract and retain qualified software
development engineers. In addition, we may not be able to internally develop new
products or solutions quickly enough to respond to market forces. As a result,
we may have to acquire technology or access to products or solutions through

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<PAGE>

mergers and acquisitions, investments and partnering arrangements. We may not
have sufficient cash, access to funding, or available equity to engage in such
transactions. Moreover, we may not be able to forge partnering arrangements or
strategic alliances on satisfactory terms, or at all, with the companies of our
choice.

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

Despite efforts to manage foreign exchange risk, our hedging activities
may not adequately protect us against the risks associated with foreign currency
fluctuations. As a consequence, we may incur losses in connection with
fluctuations in foreign currency exchange rates. Most of our international
revenue and expenses are denominated in local currencies. Due to the substantial
volatility of currency exchange rates, among other factors, it is not possible
to predict the effect of exchange rate fluctuations on our future operating
results. Although we take into account changes in exchange rates over time in
our pricing strategy, we do so only on an annual basis, resulting in substantial
pricing exposure as a result of foreign exchange volatility during the period
between annual pricing reviews. In addition, as noted previously, the sales
cycles for our products is relatively long. Foreign currency fluctuations could,
therefore, result in substantial changes in the financial impact of a specific
transaction between the time of initial customer contact and revenue
recognition. We have implemented a foreign exchange hedging program consisting
principally of the purchase of forward foreign exchange contracts in the primary
European and Asian currencies. This program is intended to hedge the value of
intercompany accounts receivable or intercompany accounts payable denominated in
foreign currencies against fluctuations in exchange rates until such receivables
are collected or payables are disbursed. Additionally, uncertainties related to
the Euro conversion could adversely affect our hedging activities.

IF A LARGE NUMBER OF THE ORDERS THAT ARE TYPICALLY BOOKED AT THE END OF A
QUARTER ARE NOT BOOKED, OUR NET INCOME FOR THAT QUARTER COULD BE SUBSTANTIALLY
REDUCED.

Our software license revenue in any quarter often depends on orders
booked and shipped in the last month, weeks or days of that quarter. At the end
of each quarter, we typically have either minimal or no backlog of orders for
the subsequent quarter. If a large number of orders or several large orders do
not occur or are deferred, revenue in that quarter could be substantially
reduced.

SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS COULD ADVERSELY AFFECT OUR
QUARTERLY OPERATING RESULTS AND LENGTHY SALES CYCLES FOR PRODUCTS MAKES REVENUES
SUSCEPTIBLE TO FLUCTUATIONS.

Our sales of software products have been affected by seasonal
purchasing trends that materially affect our quarter-to-quarter operating
results. We expect these seasonal trends to continue in the future. Revenue and
operating results in our quarter ending December 31 are typically higher
relative to other quarters because many customers make purchase decisions based
on their calendar year-end budgeting requirements and because we measure our
sales incentive plans for sales personnel on a calendar year basis. As a result,
we have historically experienced a substantial decline in revenue in the first
quarter of each fiscal year relative to the preceding quarter.

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

OUR FUTURE REVENUE AND OUR ABILITY TO MAKE INVESTMENTS IN DEVELOPING OUR
PRODUCTS IS SUBSTANTIALLY DEPENDENT UPON OUR INSTALLED CUSTOMER BASE CONTINUING
TO LICENSE OUR PRODUCTS AND RENEW OUR SERVICE AGREEMENTS.

We depend on our installed customer base for future revenue from
services and licenses of additional products. If our customers fail to renew
their maintenance agreements, our revenue will be harmed. The maintenance
agreements are generally renewable annually at the option of the customers and
there are no minimum payment obligations or

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<PAGE>

obligations to license additional software. Therefore, current customers may not
necessarily generate significant maintenance revenue in future periods. In
addition, customers may not necessarily purchase additional products or
services. Our services revenue and maintenance revenue also depend upon the
continued use of these services by our installed customer base. Any downturn in
software license revenue could result in lower services revenue in future
quarters. Moreover, if either license revenue or revenue from services declines,
we may not have sufficient cash to finance investments or acquire technology.

THE SUCCESS OF OUR INTERNATIONAL OPERATIONS IS DEPENDENT UPON MANY FACTORS WHICH
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS INTERNATIONALLY AND
COULD AFFECT OUR PROFITABILITY.

International sales represented approximately 50% of our total revenue
during the quarter ended June 30, 2000. The international operations are, and
any expanded international operations will be, subject to a variety of risks
associated with conducting business internationally that could adversely affect
our ability to sell our products internationally, and therefore, our
profitability, including the following:

- Difficulties in staffing and managing international operations,

- Problems in collecting accounts receivable,

- Longer payment cycles,

- Fluctuations in currency exchange rates,

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

- Uncertainties relative to regional, political and economic
circumstances,

- Recessionary environments in foreign economies, and

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

In particular, instability in the Asian/Pacific and Latin American
economies and financial markets, which together accounted for approximately 20%
of our total net revenues during the quarter ended June 30, 2000, could
adversely affect our ability to sell our products internationally.

ANY CANCELLATIONS OR DELAYS IN PLANNED CUSTOMER PURCHASES OF OUR PRODUCTS OR
SERVICES COULD MATERIALLY ADVERSELY AFFECT OUR NET INCOME AND COULD
SUBSTANTIALLY REDUCE QUARTERLY REVENUES.

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

IF WE FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, COMPETITORS MAY BE ABLE
TO USE OUR TECHNOLOGY OR TRADEMARKS AND THIS WOULD WEAKEN OUR COMPETITIVE
POSITION, REDUCE OUR REVENUE AND INCREASE COSTS.

Our success will continue to be heavily dependent upon proprietary
technology. We rely primarily on a

27
<PAGE>

combination of patent, copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. These means of protecting proprietary rights may not be adequate, and
the inability to protect intellectual property rights may adversely affect our
business and/or financial condition. We currently hold eight United States
patents and several pending applications. There can be no assurance that any
other patents covering our inventions will be issued or that any patent, if
issued, will provide sufficiently broad protection or will prove enforceable in
actions against alleged infringers. Our ability to sell our products and prevent
competitors from misappropriating our proprietary technology and trade names is
dependent upon protecting our intellectual property. Our products are generally
licensed to end-users on a "right-to-use" basis under a license that restricts
the use of the products for the customer's internal business purposes. We also
rely on "shrink-wrap" and "click-wrap" licenses, which include a notice
informing the end-user that by opening the product packaging, or in the case of
a click-on license by clicking on an acceptance icon and downloading the
product, the end-user agrees to be bound by the license agreement. Despite such
precautions, it may be possible for unauthorized third parties to copy aspects
of our current or future products or to obtain and use information that is
regarded as proprietary. In addition, we have licensed the source code of our
products to certain customers under certain circumstances and for restricted
uses. In addition, we have also entered into source code escrow agreements with
a number of our customers that generally require release of source code to the
customer in the event the company enters bankruptcy or liquidation proceedings
or otherwise ceases to conduct business. We may also be unable to protect our
technology because:

- Competitors may independently develop similar or superior
technology,

- Policing unauthorized use of software is difficult,

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

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

- Litigation to enforce intellectual property rights, to protect trade
secrets, or to determine the validity and scope of the proprietary
rights of others could result in substantial costs and diversion of
resources.

IN THE FUTURE, THIRD PARTIES COULD, FOR COMPETITIVE OR OTHER REASONS, ASSERT
THAT OUR PRODUCTS INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS.

As discussed above under "Notes to Unaudited Condensed Consolidated
Financial Statements--Note H--Litigation," IBM recently filed a lawsuit against
us claiming that some of our products infringe certain of IBM's patents ("IBM
claim"). Other third parties may claim that our current or future products
infringe their proprietary rights. These claims, with or without merit, could
harm our business by increasing costs and by adversely affecting our ability to
sell our products. Any claim of this type, including the IBM claim, could affect
our relationships with our existing customers and prevent future customers from
licensing our products. Any such claim, including the IBM claim, with or without
merit, could be time consuming to defend, result in costly litigation, cause
product shipment delays or require us to enter into royalty or licensing
agreements. Royalty or license agreements may not be available on acceptable
terms or at all. It is expected that software product developers will
increasingly be subject to infringement claims as the number of products and
competitors in the software industry segment grows and the functionality of
products in different industry segments overlaps.

OUR INABILITY TO RELY ON THE STATUTORY "SAFE HARBOR" AS A RESULT OF THE
SETTLEMENT OF THE SEC INVESTIGATION COULD HARM OUR BUSINESS.

In July 1997, the SEC issued a formal order of private investigation of
Informix and certain unidentified other entities and persons with respect to
accounting matters, public disclosures and trading activity in our securities
that were not described in the formal order. During the course of the
investigation, we learned that the investigation concerned the

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<PAGE>

events leading to the restatement of its financial statements, including fiscal
years 1994, 1995 and 1996, that was publicly announced in November 1997.

Effective January 11, 2000, Informix and the SEC entered into a
settlement of the investigation as to Informix. Pursuant to the settlement, we
consented to the entry by the SEC of an Order Instituting Public Administrative
Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C
of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease
and Desist Order. Pursuant to the order, we neither admitted nor denied the
findings, except as to jurisdiction, contained in the order.

The order prohibits us from violating and causing any violation of the
anti-fraud provisions of the federal securities laws, for example by making
materially false and misleading statements concerning its financial performance.
The order also prohibits us from violating or causing any violation of the
provisions of the federal securities laws requiring Informix to: (1) file
accurate quarterly and annual reports with the SEC; (2) maintain accurate
accounting books and records; and (3) maintain adequate internal accounting
controls. Pursuant to the order, we are also required to cooperate in the SEC's
continuing investigation of other entities and persons. In the event that we
violate the order, we could be subject to substantial monetary penalties.

As a consequence of the issuance of the order, we will not, for a
period of three years from the date of the issuance of the order, be able to
rely on the "safe harbor" for forward-looking statements contained in the
federal securities laws. The "safe harbor," among other things, limits potential
legal actions against us in the event a forward-looking statement concerning our
anticipated performance turns out to be inaccurate, unless it can be proved
that, at the time the statement was made, we actually knew that the statement
was false. If we become a defendant in any private securities litigation brought
under the federal securities laws, our legal position in the litigation could be
materially adversely affected by our inability to rely on the "safe harbor"
provisions for forward-looking statements.

WE MAY NOT BE ABLE TO REALIZE THE POTENTIAL FINANCIAL OR STRATEGIC BENEFITS OF
FUTURE BUSINESS ACQUISITIONS WHICH COULD HURT OUR ABILITY TO GROW OUR BUSINESS
AND SELL OUR PRODUCTS.

In the future we may acquire or invest in other businesses that offer
products, services and technologies that we believe would help expand or enhance
our products and services or help expand our distribution channels. If we were
to make such an acquisition or investment, the following risks could impair our
ability to grow our business and develop new products and ultimately could
impair our ability to sell our products:

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

- Disruption of our on-going businesses,

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

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

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

In addition, the consideration for any future acquisition could be paid
in cash, shares of our common stock, or a combination of cash and common stock.
If the consideration is paid in our common stock, existing stockholders would be
further diluted. Any amortization of goodwill or other assets resulting from any
acquisition could materially adversely affect our operating results and
financial condition.

PROVISIONS IN OUR CHARTER DOCUMENTS WITH RESPECT TO UNDESIGNATED PREFERRED STOCK
MAY DISCOURAGE POTENTIAL ACQUISITION BIDS FOR INFORMIX.

29
<PAGE>

Our board of directors is authorized to issue up to approximately
4,000,000 shares of undesignated preferred stock in one or more series. Our
board of directors can fix the price, rights, preferences, privileges and
restrictions of such preferred stock without any further vote or action by its
stockholders. However, the issuance of shares of preferred stock may delay or
prevent a change in control transaction without further action by our
stockholders. As a result, the market price of our common stock and the voting
and other rights of the holders of our common stock may be adversely affected.
The issuance of preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of our common stock, including the loss
of voting control to others.

OTHER PROVISIONS IN OUR CHARTER DOCUMENTS MAY DISCOURAGE POTENTIAL ACQUISITION
BIDS AND PREVENT CHANGES IN OUR MANAGEMENT THAT OUR STOCKHOLDERS MAY FAVOR.

Other provisions in our charter documents could discourage potential
acquisition proposals and could delay or prevent a change in control transaction
that our stockholders may favor. The provisions include:

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

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

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

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

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

DELAWARE LAW MAY INHIBIT POTENTIAL ACQUISITION BIDS WHICH MAY ADVERSELY AFFECT
THE MARKET PRICE FOR OUR COMMON STOCK AND PREVENT CHANGES IN ITS MANAGEMENT THAT
OURSTOCKHOLDERS MAY FAVOR.

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

30
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

DISCLOSURES ABOUT MARKET RATE RISK

MARKET RATE RISK. The following discussion about our market rate risk
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates, foreign currency exchange rates and equity
security price risk. We do not use derivative financial instruments for
speculative trading purposes.

INTEREST RATE RISK. Our exposure to market rate risk for changes in
interest rates relates primarily to our investment portfolio. We maintain a
short-term investment portfolio consisting mainly of debt securities with an
average maturity of less than two years. We do not use derivative financial
instruments in our investment portfolio and 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. These
available-for-sale securities are subject to interest rate risk and will fall in
value if market interest rates increase. If market interest rates were to
increase immediately and uniformly by 10% from levels at June 30, 2000, the fair
value of the portfolio would decline by an immaterial amount. We have the
ability to hold our fixed income investments until maturity and believe that the
effect, if any, of reasonably possible near-term changes in interest rates on
our financial position, results of operations and cash flows would not be
material.

EQUITY SECURITY PRICE RISK. We hold a small portfolio of
marketable-equity traded securities that are subject to market price volatility.
Equity price fluctuations of plus or minus 10% would have had a $0.8 million
impact on the value of these securities in 2000.

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. 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 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
periodically assess market conditions and occasionally 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 for financial reporting purposes and, therefore, are marked to market.
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.

31
<PAGE>

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

The table below provides information about our foreign currency forward
exchange contracts. The information is provided in U.S. dollar equivalents and
presents the notional amount (contract amount), the weighted average contractual
foreign currency exchange rates and fair value. Fair value represents the
difference in value of the contracts at the spot rate at June 30, 2000 and the
forward rate, plus the unamortized premium or discount. All contracts mature
within twelve months.

FORWARD CONTRACTS

<TABLE>
<CAPTION>
Weighted-
Contract Average
At June 30, 2000 Amount Contract Rate Fair Value
---------------- ------------- --------------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C>
Foreign currency to be sold under contract:
Euro......................................................... $ 24,166 1.06 $ 73
Japanese Yen................................................. 5,440 103.83 99
Korean Won................................................... 5,348 1,122.00 (26)
Czech Republic Koruna........................................ 3,547 38.02 (12)
Australian Dollar............................................ 3,377 0.60 8
South African Rand........................................... 3,161 6.90 (40)
Swiss Franc.................................................. 2,704 1.63 15
Taiwan Dollar................................................ 2,588 30.91 (8)
German Mark.................................................. 2,185 2.06 12
Thai Bhat.................................................... 2,173 39.11 2
French Franc................................................. 2,101 6.90 12
Singapore Dollar............................................. 1,456 1.72 14
Other (individually less than $1 million).................... 860 * (2)
------------- ----------
Total........................................................... $ 59,106 $ 147
============= ==========

Foreign currency to be purchased under contract:
British Pound................................................ $ 18,386 1.51 $ 18
Other (individually less than $1 million).................... 499 * (2)
------------- ----------
Total........................................................... $ 18,885 $ 16
============= ==========
Total........................................................... $ 77,991 $ 163
============= ==========
</TABLE>

-----
* Not meaningful

32
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

The 2000 Annual Meeting of the Stockholders of the Company was held on
June 21, 2000. The following matters were voted on at the Annual Meeting:

1. Election of the Class I Directors of the Company:

<TABLE>
<CAPTION>
Board Nominee For Withheld Broker Non-votes
------------- --- -------- ----------------
<S> <C> <C> <C>
Leslie G. Denend 241,488,976 3,635,179 0
Cyril J. Yansouni 241,433,329 3,690,826 0

</TABLE>

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

Robert J. Finocchio, Jr.
Jean-Yves F. Dexmier
Peter Gyenes
James L. Koch
Thomas A. McDonnell
Robert M. Morrill

2. Amendment of the Company's 1994 Stock Option and Award Plan:

<TABLE>
<CAPTION>
For Against Abstained Broker Non-votes
--- ------- --------- ----------------

3. Amendment of the Company's 1997 Employee Stock Purchase Plan:

<TABLE>
<CAPTION>
For Against Abstained Broker Non-votes
--- ------- --------- ----------------
<S> <C> <C> <C>
229,271,481 14,939,259 913,415 0
</TABLE>

4. Ratification of the choice of KPMG LLP as the Company's independent
auditors:

<TABLE>
<CAPTION>
For Against Abstained Broker Non-votes
--- ------- --------- ----------------
<S> <C> <C> <C>
243,420,088 1,187,900 516,167 0
</TABLE>

33
<PAGE>

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>

3.2(f)* Amendment to Bylaws, dated June 13, 2000

10.76* Offer of Employment Letter, dated May 22, 2000, from
Registrant to Yon Yoon Jorden (with attached Change of Control
and Severance Agreement and Relocation Policy, including
executive supplement)

27.1 Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K.

None.

-------------------
* Filed herewith

34
<PAGE>

SIGNATURES

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

INFORMIX CORPORATION

Dated: August 14, 2000 By: /s/ YON YOON JORDEN
----------------------------------------------
Yon Yoon Jorden
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)

By: /s/ WILLIAM F. O'KELLY
----------------------------------------------
Bill O'Kelly
VICE PRESIDENT CORPORATE FINANCE
(PRINCIPAL ACCOUNTING OFFICER)