Science & Technology
Science and Technology
Science and Technology
Fri, June 25, 2010
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Oracle Reports Q4 GAAP EPS of $0.46, Non-GAAP EPS $0.60
REDWOOD SHORES, CA--(Marketwire - June 24, 2010) - Oracle Corporation (
For fiscal year 2010, GAAP total revenues were up 15% to $26.8 billion, while non-GAAP total revenues were up 15% to $27.0 billion. Fiscal year 2010 GAAP new software license revenues were up 6% to $7.5 billion. GAAP software license updates and product support revenues were up 11% to $13.1 billion, while non-GAAP software license updates and product support revenues were up 10% to $13.2 billion. GAAP operating income was up 9% to $9.1 billion, and GAAP operating margin was 34%. Non-GAAP operating income was up 15% to $12.5 billion, and non-GAAP operating margin was 46%. GAAP net income was up 10% to $6.1 billion, while non-GAAP net income was up 15% to $8.5 billion. GAAP earnings per share were $1.21, up 11% compared to last year while non-GAAP earnings per share were up 16% to $1.67.
"We executed better than expected on both the top and bottom line for the quarter," said Oracle CFO, Jeff Epstein. "This strong performance plus disciplined business management led to a non-GAAP operating margin of 46% in Q4, fully including the $1.2 billion of Sun systems hardware that we sold in the quarter."
"We estimate that Sun contributed over $400 million to non-GAAP operating income in our Q4," said Oracle President, Safra Catz. "This compares with a loss in Sun's quarter ending June of last year, when Sun was an independent company. Now that Sun is profitable, we have increased confidence that we will meet or exceed our goal of Sun contributing $1.5 billion to non-GAAP operating income in FY2011, and $2.0 billion in FY2012."
"We continue to take large chunks of market share away from SAP," said Oracle President, Charles Phillips. "Over the last twelve months Oracle's applications business has grown 5% on a constant dollar basis while SAP's business has declined 24% over their previous four quarters. This trend has been going on for a long time: Oracle's applications business has grown 60% in the last four years while SAP's business is 7% smaller than it was four years ago."
"Version 2 of our Sun Exadata database machine outperforms IBM's fastest computer in both data warehousing and transaction processing," said Oracle CEO, Larry Ellison. "As a result, some of IBM's largest customers began buying Exadata machines rather than big IBM servers in Q4 of FY2010. And the FY2011 Exadata sales pipeline is fast approaching the $1 billion mark."
In addition, Oracle's Board of Directors declared a cash dividend of $0.05 per share of outstanding common stock to be paid to stockholders of record as of the close of business on July 14, 2010, with a payment date of August 4, 2010. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of Oracle's Board of Directors.
The estimate of the Sun contribution to operating income referred to above includes allocations of general and administrative expenses and other costs which cannot be directly identified as a result of the integration of the Sun and Oracle businesses to date. For additional information, please see footnote 8 in the Reconciliation of Selected GAAP Measures to non-GAAP Measures. Additional reconciliations can be found in the attached tables and at [ www.oracle.com/investors ].
Q4 Earnings Conference Call and Webcast
Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (866) 288-9872 or (913) 312-2900, Passcode: 911443. To access the live web broadcast of this event, please visit the Oracle Investor Relations website at [ http://www.oracle.com/investor ].
About Oracle
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"Safe Harbor" Statement: Statements in this press release relating to Oracle's or its Board of Directors' future plans, expectations, beliefs, intentions and prospects are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the recent recession and global economic crisis, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for software license updates and product support. (3) Our entrance into the hardware systems business may not be successful, and we may fail to achieve our financial forecasts with respect to this new business. (4) We have an active acquisition program and our acquisitions, including our acquisition of Sun Microsystems, may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses and risks relating to compliance with international and U.S. laws that apply to our international operations. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions and could require us to reduce prices or cause us to lose customers. (7) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses or hardware systems products or purchase or renew support contracts. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at [ http://www.oracle.com/investor ]. All information set forth in this press release is current as of June 24, 2010. Oracle undertakes no duty to update any statement in light of new information or future events.
ORACLE CORPORATION Q4 FISCAL 2010 FINANCIAL RESULTS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ in millions, except per share data) % Increase (Decrease) Three Months Ended May 31, % in -------------------------------------- Increase Constant % of % of (Decrease) Currency 2010 Revenues 2009 Revenues in US $ (1) -------- -------- -------- -------- -------- -------- REVENUES New software licenses $ 3,135 33% $ 2,744 40% 14% 15% Software license updates and product support 3,431 36% 3,052 44% 12% 11% -------- -------- -------- -------- Software Revenues 6,566 69% 5,796 84% 13% 13% -------- -------- -------- -------- Hardware systems products 1,233 13% - 0% * * Hardware systems support 598 6% - 0% * * -------- -------- -------- -------- Hardware Systems Revenues 1,831 19% - 0% * * -------- -------- -------- -------- Services 1,108 12% 1,065 16% 4% 3% -------- -------- -------- -------- Total Revenues 9,505 100% 6,861 100% 39% 38% -------- -------- -------- -------- OPERATING EXPENSES Sales and marketing 1,745 18% 1,326 19% 32% 31% Software license updates and product support 292 3% 293 4% 0% (2%) Hardware systems products 675 7% - 0% * * Hardware systems support 306 4% - 0% * * Services 969 10% 886 13% 9% 8% Research and development 1,063 11% 731 11% 46% 44% General and administrative 293 3% 214 3% 37% 36% Amortization of intangible assets 605 6% 437 7% 38% 38% Acquisition related and other 103 1% 19 0% 450% 441% Restructuring 154 2% 71 1% 117% 116% -------- -------- -------- -------- Total Operating Expenses 6,205 65% 3,977 58% 56% 54% -------- -------- -------- -------- OPERATING INCOME 3,300 35% 2,884 42% 14% 15% Interest expense (201) (2%) (159) (2%) 27% 27% Non-operating income (expense), net (24) 0% 29 0% (181%) (171%) -------- -------- -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 3,075 33% 2,754 40% 12% 12% -------- -------- -------- -------- Provision for income taxes 711 8% 863 12% (18%) (17%) -------- -------- -------- -------- NET INCOME $ 2,364 25% $ 1,891 28% 25% 26% ======== ======== ======== ======== EARNINGS PER SHARE: Basic $ 0.47 $ 0.38 Diluted $ 0.46 $ 0.38 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 5,022 4,995 Diluted 5,090 5,043 (1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended May 31, 2010 compared with the corresponding prior year period increased our revenues by 1 percentage point, operating expenses by 2 percentage points and reduced our operating income by 1 percentage point. * Not meaningful ORACLE CORPORATION Q4 FISCAL 2010 FINANCIAL RESULTS RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1) ($ in millions, except per share data) Three Months Ended May 31, ---------------------------------------------------------- 2010 2010 2009 2009 GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP -------- -------- -------- -------- -------- -------- TOTAL REVENUES (3) (4) $ 9,505 $ 126 $ 9,631 $ 6,861 $ 20 $ 6,881 TOTAL SOFTWARE REVENUES (3) $ 6,566 $ 36 $ 6,602 $ 5,796 $ 20 $ 5,816 New software licenses 3,135 - 3,135 2,744 - 2,744 Software license updates and product support (3) 3,431 36 3,467 3,052 20 3,072 TOTAL HARDWARE SYSTEMS REVENUES (4) $ 1,831 $ 90 $ 1,921 $ - $ - $ - Hardware systems products 1,233 - 1,233 - - - Hardware systems support (4) 598 90 688 - - - TOTAL OPERATING EXPENSES $ 6,205 $ (989) $ 5,216 $ 3,977 $ (609) $ 3,368 Hardware systems products 675 (6) 669 - - - Stock-based compensation (5) 121 (121) - 82 (82) - Amortization of intangible assets (6) 605 (605) - 437 (437) - Acquisition related and other 103 (103) - 19 (19) - Restructuring 154 (154) - 71 (71) - OPERATING INCOME $ 3,300 $ 1,115 $ 4,415 $ 2,884 $ 629 $ 3,513 OPERATING MARGIN % 35% 46% 42% 51% INCOME TAX EFFECTS (7) $ 711 $ 431 $ 1,142 $ 863 $ 197 $ 1,060 NET INCOME $ 2,364 $ 684 $ 3,048 $ 1,891 $ 432 $ 2,323 DILUTED EARNINGS PER SHARE $ 0.46 $ 0.60 $ 0.38 $ 0.46 DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,090 - 5,090 5,043 - 5,043 ESTIMATED OPERATING INCOME CONTRIBUTION FROM SUN (8) $ (91) $ 503 $ 412 $ - $ - $ - % Increase (Decrease) in % Increase Constant Currency (Decrease) in US $ (2) ------------------ ------------------ GAAP Non-GAAP GAAP Non-GAAP -------- -------- -------- -------- TOTAL REVENUES (3) (4) 39% 40% 38% 39% TOTAL SOFTWARE REVENUES (3) 13% 14% 13% 13% New software licenses 14% 14% 15% 15% Software license updates and product support (3) 12% 13% 11% 11% TOTAL HARDWARE SYSTEMS REVENUES (4) * * * * Hardware systems products * * * * Hardware systems support (4) * * * * TOTAL OPERATING EXPENSES 56% 55% 54% 53% Hardware systems products * * * * Stock-based compensation (5) 51% * 51% * Amortization of intangible assets (6) 38% * 38% * Acquisition related and other 450% * 441% * Restructuring 117% * 116% * OPERATING INCOME 14% 26% 15% 26% OPERATING MARGIN % (732) bp (522) bp (694) bp (483) bp INCOME TAX EFFECTS (7) (18%) 8% (17%) 8% NET INCOME 25% 31% 26% 32% DILUTED EARNINGS PER SHARE 24% 30% 25% 30% DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1% 1% 1% 1% ESTIMATED OPERATING INCOME CONTRIBUTION FROM SUN (8) * * * * (1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A. (2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. (3) As of May 31, 2010, approximately $61 million and $25 million in estimated revenues related to assumed software support contracts will not be recognized for fiscal 2011 and fiscal 2012, respectively, due to business combination accounting rules. (4) As of May 31, 2010, approximately $148 million, $35 million and $11 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2011, fiscal 2012 and fiscal 2013, respectively, due to business combination accounting rules. (5) Stock-based compensation is included in the following GAAP operating expense categories: Three Months Ended Three Months Ended May 31, 2010 May 31, 2009 --------------------------- --------------------------- GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP -------- ------- -------- -------- ------- -------- Sales and marketing $ 24 $ (24) $ - $ 16 $ (16) $ - Software license updates and product support 5 (5) - 4 (4) - Hardware systems products 1 (1) - - - - Hardware systems support 1 (1) - - - - Services 4 (4) - 3 (3) - Research and development 50 (50) - 34 (34) - General and administrative 36 (36) - 25 (25) - -------- ------- -------- -------- ------- -------- Subtotal 121 (121) - 82 (82) - -------- ------- -------- -------- ------- -------- Acquisition related and other 5 (5) - 1 (1) - -------- ------- -------- -------- ------- -------- Total stock-based compens- ation $ 126 $ (126) $ - $ 83 $ (83) $ - ======== ======= ======== ======== ======= ======== (6) Estimated future annual amortization expense related to intangible assets as of May 31, 2010 is as follows: Fiscal 2011 $ 2,285 Fiscal 2012 2,006 Fiscal 2013 1,638 Fiscal 2014 1,354 Fiscal 2015 1,015 Thereafter 638 --------- Total intangible assets subject to amortization 8,936 In-process research and development 385 --------- Total intangible assets, net $ 9,321 ========= (7) Income tax effects were calculated reflecting an effective GAAP tax rate of 23.1% and 31.3% in the fourth quarter of fiscal 2010 and 2009, respectively, and an effective non-GAAP tax rate of 27.3% and 31.3% in the fourth quarter of fiscal 2010 and 2009, respectively. The differences between our GAAP and non-GAAP tax expense in the fourth quarter of fiscal 2010 were due to the income tax effects of non-GAAP pretax income adjustments including differences in jurisdictional tax rates, and related tax benefits attributable to our restructuring expenses in this period. The differences were also due to income tax effects related to acquired tax exposures. (8) Our hardware systems business had a margin of $406 million during the three months ended May 31, 2010 and was comprised of revenues and expenses that were directly attributable to our hardware systems business. A portion of Sun's legacy businesses, however, are also included in our software and services businesses. We estimate that during the three months ended May 31, 2010, Sun reduced our GAAP operating income by approximately $91 million and increased our non-GAAP operating income by approximately $412 million after including research and development expenses, an allocation of margin from Sun to our software and services businesses and an allocation of general and administrative expenses and other expenses, which cannot be directly identified as a result of the integration of Sun into our operations to date: Three Months Ended May 31, 2010 --------------------------------- GAAP Adj. Non-GAAP --------- ---------- --------- Hardware systems business direct revenues & expenses, net** $ 586 $ 96 $ 682 Stock-based compensation (5)** (4) 4 - Amortization of intangible assets (6)** (176) 176 - --------- ---------- --------- Total hardware systems business margin** 406 276 682 Allocation of margin from other Sun businesses*** 139 27 166 Research and development expenses (338) - (338) Allocation of general and administrative expenses and other (98) - (98) Allocation of acquisition related and other (1) (93) 93 - Allocation of restructuring (1) (107) 107 - --------- ---------- --------- Total Sun contribution to operating margin $ (91) $ 503 $ 412 ========= ========== ========= * Not meaningful ** Derived from the total margin of, and other expenses allocated to, our hardware systems businesses as reported in Management's Discussion and Analysis of Financial Condition and Results of Operations within our Form 10-Q for the nine months ended February 28, 2010 and our to be filed Form 10-K for the fiscal year ended May 31, 2010. Our hardware systems business' direct revenues and expenses, net pursuant to GAAP include fair value adjustments of $90 million related to our hardware systems support revenues and $6 million related to our hardware systems products expenses. Our non-GAAP hardware systems business' direct revenues and expenses, net exclude these fair value adjustments and also exclude an allocation of stock-based compensation and amortization of intangible assets. Refer to Appendix A for a more complete discussion of these adjustments. *** Represents management's estimated allocation of Sun's direct revenues and expenses contributions to our software and services businesses. The GAAP calculation presented includes fair value adjustments of $27 million related to our software license updates and product support revenues. Our non-GAAP allocation of margin excludes this fair value adjustment. Refer to Appendix A for a more complete discussion of this fair value adjustment. ORACLE CORPORATION FISCAL 2010 YEAR TO DATE FINANCIAL RESULTS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ in millions, except per share data) % Increase (Decrease) Year Ended May 31, % in -------------------------------------- Increase Constant % of % of (Decrease) Currency 2010 Revenues 2009 Revenues in US $ (1) -------- -------- -------- -------- -------- -------- REVENUES New software licenses $ 7,533 28% $ 7,123 31% 6% 4% Software license updates and product support 13,092 49% 11,754 50% 11% 10% -------- -------- -------- -------- Software Revenues 20,625 77% 18,877 81% 9% 8% -------- -------- -------- -------- Hardware systems products 1,506 6% - 0% * * Hardware systems support 784 3% - 0% * * -------- -------- -------- -------- Hardware Systems Revenues 2,290 9% - 0% * * -------- -------- -------- -------- Services 3,905 14% 4,375 19% (11%) (12%) -------- -------- -------- -------- Total Revenues 26,820 100% 23,252 100% 15% 14% -------- -------- -------- -------- OPERATING EXPENSES Sales and marketing 5,080 19% 4,638 20% 10% 8% Software license updates and product support 1,063 4% 1,088 4% (2%) (4%) Hardware systems products 880 3% - 0% * * Hardware systems support 423 2% - 0% * * Services 3,398 13% 3,706 16% (8%) (9%) Research and development 3,254 12% 2,767 12% 18% 17% General and administrative 911 3% 785 3% 16% 16% Amortization of intangible assets 1,973 7% 1,713 7% 15% 15% Acquisition related and other 154 1% 117 1% 32% 36% Restructuring 622 2% 117 1% 432% 423% -------- -------- -------- -------- Total Operating Expenses 17,758 66% 14,931 64% 19% 18% -------- -------- -------- -------- OPERATING INCOME 9,062 34% 8,321 36% 9% 6% Interest expense (754) (3%) (630) (3%) 20% 20% Non-operating income (expense), net (65) 0% 143 1% (145%) (144%) -------- -------- -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES 8,243 31% 7,834 34% 5% 3% -------- -------- -------- -------- Provision for income taxes 2,108 8% 2,241 10% (6%) (9%) -------- -------- -------- -------- NET INCOME $ 6,135 23% $ 5,593 24% 10% 7% ======== ======== ======== ======== EARNINGS PER SHARE: Basic $ 1.22 $ 1.10 Diluted $ 1.21 $ 1.09 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 5,014 5,070 Diluted 5,073 5,130 (1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the year ended May 31, 2010 compared with the corresponding prior year increased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 3 percentage points. * Not meaningful ORACLE CORPORATION FISCAL 2010 YEAR TO DATE FINANCIAL RESULTS RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1) ($ in millions, except per share data) Year Ended May 31, ---------------------------------------------------------- 2010 2010 2009 2009 GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP -------- -------- -------- -------- -------- -------- TOTAL REVENUES (3) (4) $ 26,820 $ 214 $ 27,034 $ 23,252 $ 243 $ 23,495 TOTAL SOFTWARE REVENUES (3) $ 20,625 $ 86 $ 20,711 $ 18,877 $ 243 $ 19,120 New software licenses 7,533 - 7,533 7,123 - 7,123 Software license updates and product support (3) 13,092 86 13,178 11,754 243 11,997 TOTAL HARDWARE SYSTEMS REVENUES (4) $ 2,290 $ 128 $ 2,418 $ - $ - $ - Hardware systems products 1,506 - 1,506 - - - Hardware systems support (4) 784 128 912 - - - TOTAL OPERATING EXPENSES $ 17,758 $ (3,199) $ 14,559 $ 14,931 $ (2,287) $ 12,644 Hardware systems products 880 (29) 851 - - - Stock-based compensation (5) 421 (421) - 340 (340) - Amortization of intangible assets (6) 1,973 (1,973) - 1,713 (1,713) - Acquisition related and other 154 (154) - 117 (117) - Restructuring 622 (622) - 117 (117) - OPERATING INCOME $ 9,062 $ 3,413 $ 12,475 $ 8,321 $ 2,530 $ 10,851 OPERATING MARGIN % 34% 46% 36% 46% INCOME TAX EFFECTS (7) $ 2,108 $ 1,054 $ 3,162 $ 2,241 $ 730 $ 2,971 NET INCOME $ 6,135 $ 2,359 $ 8,494 $ 5,593 $ 1,800 $ 7,393 DILUTED EARNINGS PER SHARE $ 1.21 $ 1.67 $ 1.09 $ 1.44 DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,073 - 5,073 5,130 - 5,130 % Increase (Decrease) in % Increase Constant Currency (Decrease) in US $ (2) ------------------ ------------------ GAAP Non-GAAP GAAP Non-GAAP -------- -------- -------- -------- TOTAL REVENUES (3) (4) 15% 15% 14% 14% TOTAL SOFTWARE REVENUES (3) 9% 8% 8% 7% New software licenses 6% 6% 4% 4% Software license updates and product support (3) 11% 10% 10% 8% TOTAL HARDWARE SYSTEMS REVENUES (4) * * * * Hardware systems products * * * * Hardware systems support (4) * * * * TOTAL OPERATING EXPENSES 19% 15% 18% 14% Hardware systems products * * * * Stock-based compensation (5) 24% * 24% * Amortization of intangible assets (6) 15% * 15% * Acquisition related and other 32% * 36% * Restructuring 432% * 423% * OPERATING INCOME 9% 15% 6% 13% OPERATING MARGIN % (200) bp (4) bp (237) bp (28) bp INCOME TAX EFFECTS (7) (6%) 6% (9%) 4% NET INCOME 10% 15% 7% 13% DILUTED EARNINGS PER SHARE 11% 16% 8% 14% DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (1%) (1%) (1%) (1%) (1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A. (2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on May 31, 2009, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. (3) As of May 31, 2010, approximately $61 million and $25 million in estimated revenues related to assumed software support contracts will not be recognized for fiscal 2011 and fiscal 2012, respectively, due to business combination accounting rules. (4) As of May 31, 2010, approximately $148 million, $35 million and $11 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2011, fiscal 2012 and fiscal 2013, respectively, due to business combination accounting rules. (5) Stock-based compensation is included in the following GAAP operating expense categories: Year Ended Year Ended May 31, 2010 May 31, 2009 --------------------------- --------------------------- GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP -------- ------- -------- -------- ------- -------- Sales and marketing $ 81 $ (81) $ - $ 67 $ (67) $ - Software license updates and product support 17 (17) - 13 (13) - Hardware systems products 3 (3) - - - - Hardware systems support 2 (2) - - - - Services 14 (14) - 12 (12) - Research and development 172 (172) - 155 (155) - General and administrative 132 (132) - 93 (93) - -------- ------- -------- -------- ------- -------- Subtotal 421 (421) - 340 (340) - -------- ------- -------- -------- ------- -------- Acquisition related and other 15 (15) - 15 (15) - -------- ------- -------- -------- ------- -------- Total stock-based compens- ation $ 436 $ (436) $ - $ 355 $ (355) $ - ======== ======= ======== ======== ======= ======== (6) Estimated future annual amortization expense related to intangible assets as of May 31, 2010 is as follows: Fiscal 2011 $ 2,285 Fiscal 2012 2,006 Fiscal 2013 1,638 Fiscal 2014 1,354 Fiscal 2015 1,015 Thereafter 638 -------- Total intangible assets subject to amortization 8,936 In-process research and development 385 -------- Total intangible assets, net $ 9,321 ======== (7) Income tax effects were calculated reflecting an effective GAAP tax rate of 25.6% and 28.6% in fiscal 2010 and 2009, respectively, and an effective non-GAAP tax rate of 27.1% and 28.7% in fiscal 2010 and 2009, respectively. The differences between our GAAP and non-GAAP tax expense in fiscal 2010 were due to the income tax effects of non-GAAP pretax income adjustments including differences in jurisdictional tax rates, and related tax benefits attributable to our restructuring expenses in this period. The differences in fiscal 2010 and 2009 were also due to income tax effects related to acquired tax exposures. * Not meaningful ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions) May 31, May 31, 2010 2009 --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 9,914 $ 8,995 Marketable securities 8,555 3,629 Trade receivables, net 5,585 4,430 Inventories 259 - Deferred tax assets 1,159 661 Prepaid expenses and other current assets 1,532 866 --------- --------- Total Current Assets 27,004 18,581 Non-Current Assets: Property, plant and equipment, net 2,763 1,922 Intangible assets, net 9,321 7,269 Goodwill 20,425 18,842 Other assets 2,065 802 --------- --------- Total Non-Current Assets 34,574 28,835 --------- --------- TOTAL ASSETS $ 61,578 $ 47,416 ========= ========= LIABILITIES AND EQUITY Current Liabilities: Notes payable, current and other current borrowings $ 3,145 $ 1,001 Accounts payable 775 271 Accrued compensation and related benefits 1,895 1,409 Deferred revenues 5,900 4,592 Other current liabilities 2,976 1,876 --------- --------- Total Current Liabilities 14,691 9,149 Non-Current Liabilities: Notes payable and other non-current borrowings 11,510 9,237 Income taxes payable 2,695 2,423 Deferred tax liabilities 424 480 Other non-current liabilities 1,059 682 --------- --------- Total Non-Current Liabilities 15,688 12,822 Equity 31,199 25,445 --------- --------- TOTAL LIABILITIES AND EQUITY $ 61,578 $ 47,416 ========= ========= ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions) Year Ended May 31, ------------------- 2010 2009 -------- -------- Cash Flows From Operating Activities: Net income $ 6,135 $ 5,593 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 298 263 Amortization of intangible assets 1,973 1,713 Deferred income taxes (511) (395) Stock-based compensation 436 355 Tax benefits on the exercise of stock options and vesting of restricted stock-based awards 203 252 Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards (110) (194) Other, net 13 185 Changes in operating assets and liabilities, net of effects from acquisitions: (Increase) decrease in trade receivables, net (219) 454 Decrease in inventories 73 - Decrease in prepaid expenses and other assets 340 145 Decrease in accounts payable and other liabilities (360) (691) (Decrease) increase in income taxes payable (79) 142 Increase in deferred revenues 489 433 -------- -------- Net cash provided by operating activities 8,681 8,255 -------- -------- Cash Flows From Investing Activities: Purchases of marketable securities and other investments (15,703) (9,315) Proceeds from maturities and sales of marketable securities and other investments 11,220 8,404 Acquisitions, net of cash acquired (5,606) (1,159) Capital expenditures (230) (529) -------- -------- Net cash used for investing activities (10,319) (2,599) -------- -------- Cash Flows From Financing Activities: Payments for repurchases of common stock (992) (3,972) Proceeds from issuances of common stock 874 760 Payment of dividends to stockholders (1,004) (250) Proceeds from borrowings, net of issuance costs 7,220 - Repayments of borrowings (3,582) (1,004) Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards 110 194 Distributions to noncontrolling interests (59) (53) Other, net 97 (97) -------- -------- Net cash provided by (used for) financing activities 2,664 (4,422) -------- -------- Effect of exchange rate changes on cash and cash equivalents (107) (501) -------- -------- Net increase in cash and cash equivalents 919 733 -------- -------- Cash and cash equivalents at beginning of period 8,995 8,262 -------- -------- Cash and cash equivalents at end of period $ 9,914 $ 8,995 ======== ======== ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS FREE CASH FLOW - TRAILING 4-QUARTERS (1) ($ in millions) Fiscal 2009 Fiscal 2010 ------------------------------ ------------------------------ Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ------ ------ ------ ------ ------ ------ ------ ------ GAAP Operating Cash Flow $7,941 $8,089 $8,542 $8,255 $8,753 $8,654 $8,178 $8,681 Capital Expenditures (2) (479) (486) (539) (529) (261) (230) (199) (230) ------ ------ ------ ------ ------ ------ ------ ------ Free Cash Flow $7,462 $7,603 $8,003 $7,726 $8,492 $8,424 $7,979 $8,451 ====== ====== ====== ====== ====== ====== ====== ====== % Growth over prior year 20% 15% 14% 8% 14% 11% 0% 9% ------ ------ ------ ------ ------ ------ ------ ------ GAAP Net Income $5,758 $5,750 $5,739 $5,593 $5,640 $5,802 $5,663 $6,135 Free Cash Flow as a % of Net Income 130% 132% 139% 138% 151% 145% 141% 138% (1) To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity. (2) Represents capital expenditures as reported in cash flows from investing activities on our cash flow statements presented in accordance with GAAP. ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1) ($ in millions) Fiscal 2009 ------------------------------------------------ Q1 Q2 Q3 Q4 TOTAL -------- -------- -------- -------- -------- REVENUES New software licenses $ 1,237 $ 1,626 $ 1,516 $ 2,744 $ 7,123 Software license updates and product support 2,935 2,850 2,917 3,052 11,754 -------- -------- -------- -------- -------- Software Revenues 4,172 4,476 4,433 5,796 18,877 Hardware systems products - - - - - Hardware systems support - - - - - -------- -------- -------- -------- -------- Hardware Systems Revenues - - - - - Consulting 865 842 758 782 3,247 On Demand 195 189 191 204 779 Education 99 100 71 79 349 -------- -------- -------- -------- -------- Services Revenues 1,159 1,131 1,020 1,065 4,375 -------- -------- -------- -------- -------- Total Revenues $ 5,331 $ 5,607 $ 5,453 $ 6,861 $ 23,252 ======== ======== ======== ======== ======== AS REPORTED REVENUE GROWTH RATES New software licenses 14% (3%) (6%) (13%) (5%) Software license updates and product support 23% 14% 11% 8% 14% Software Revenues 20% 8% 5% (3%) 6% Hardware systems products * * * * * Hardware systems support * * * * * Hardware Systems Revenues * * * * * Consulting 8% (4%) (10%) (18%) (7%) On Demand 23% 13% 10% 5% 12% Education (2%) (9%) (23%) (30%) (16%) Services Revenues 9% (2%) (8%) (16%) (5%) Total Revenues 18% 6% 2% (5%) 4% CONSTANT CURRENCY GROWTH RATES (2) New software licenses 10% 5% 3% (4%) 1% Software license updates and product support 18% 20% 20% 18% 19% Software Revenues 16% 14% 14% 6% 12% Hardware systems products * * * * * Hardware systems support * * * * * Hardware Systems Revenues * * * * * Consulting 5% 4% 0% (10%) (1%) On Demand 19% 19% 19% 15% 18% Education (6%) (3%) (16%) (23%) (12%) Services Revenues 6% 5% 2% (7%) 1% Total Revenues 14% 12% 11% 4% 10% -------- -------- -------- -------- -------- GEOGRAPHIC REVENUES REVENUES Americas $ 2,687 $ 2,904 $ 2,846 $ 3,463 $ 11,900 Europe, Middle East & Africa 1,830 1,881 1,824 2,413 7,948 Asia Pacific 814 822 783 985 3,404 -------- -------- -------- -------- -------- Total Revenues $ 5,331 $ 5,607 $ 5,453 $ 6,861 $ 23,252 ======== ======== ======== ======== ======== HEADCOUNT GEOGRAPHIC AREA Americas 32,993 33,526 32,919 32,347 Europe, Middle East & Africa 17,096 17,184 17,348 17,129 Asia Pacific 35,099 35,947 36,321 36,086 -------- -------- -------- -------- -------- Total Company 85,188 86,657 86,588 85,562 ======== ======== ======== ======== ======== Fiscal 2010 ------------------------------------------------ Q1 Q2 Q3 Q4 TOTAL -------- -------- -------- -------- -------- REVENUES New software licenses $ 1,028 $ 1,653 $ 1,718 $ 3,135 $ 7,533 Software license updates and product support 3,117 3,247 3,297 3,431 13,092 -------- -------- -------- -------- -------- Software Revenues 4,145 4,900 5,015 6,566 20,625 Hardware systems products - - 273 1,233 1,506 Hardware systems support - - 185 598 784 -------- -------- -------- -------- -------- Hardware Systems Revenues - - 458 1,831 2,290 Consulting 663 692 651 713 2,720 On Demand 180 188 211 295 874 Education 66 78 69 100 311 -------- -------- -------- -------- -------- Services Revenues 909 958 931 1,108 3,905 -------- -------- -------- -------- -------- Total Revenues $ 5,054 $ 5,858 $ 6,404 $ 9,505 $ 26,820 ======== ======== ======== ======== ======== AS REPORTED REVENUE GROWTH RATES New software licenses (17%) 2% 13% 14% 6% Software license updates and product support 6% 14% 13% 12% 11% Software Revenues (1%) 9% 13% 13% 9% Hardware systems products * * * * * Hardware systems support * * * * * Hardware Systems Revenues * * * * * Consulting (23%) (18%) (14%) (9%) (16%) On Demand (8%) (1%) 10% 45% 12% Education (34%) (22%) (4%) 26% (11%) Services Revenues (22%) (15%) (9%) 4% (11%) Total Revenues (5%) 4% 17% 39% 15% CONSTANT CURRENCY GROWTH RATES (2) New software licenses (14%) (5%) 8% 15% 4% Software license updates and product support 11% 9% 8% 11% 10% Software Revenues 4% 4% 8% 13% 8% Hardware systems products * * * * * Hardware systems support * * * * * Hardware Systems Revenues * * * * * Consulting (19%) (22%) (18%) (10%) (17%) On Demand (3%) (4%) 6% 44% 11% Education (30%) (26%) (8%) 24% (12%) Services Revenues (18%) (19%) (13%) 3% (12%) Total Revenues (1%) 0% 12% 38% 14% -------- -------- -------- -------- -------- GEOGRAPHIC REVENUES REVENUES Americas $ 2,671 $ 2,979 $ 3,284 $ 4,886 $ 13,819 Europe, Middle East & Africa 1,642 1,976 2,167 3,153 8,938 Asia Pacific 741 903 953 1,466 4,063 -------- -------- -------- -------- -------- Total Revenues $ 5,054 $ 5,858 $ 6,404 $ 9,505 $ 26,820 ======== ======== ======== ======== ======== HEADCOUNT GEOGRAPHIC AREA Americas 32,034 31,849 44,554 43,968 Europe, Middle East & Africa 16,839 16,491 23,566 23,040 Asia Pacific 35,766 35,026 38,372 37,561 -------- -------- -------- -------- -------- Total Company 84,639 83,366 106,492 104,569 ======== ======== ======== ======== ======== (1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding. (2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods. * Not meaningful ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1) ($ in millions) Fiscal 2009 ------------------------------------------------ Q1 Q2 Q3 Q4 TOTAL -------- -------- -------- -------- -------- SOFTWARE REVENUES DATABASE & MIDDLEWARE REVENUES New software licenses $ 906 $ 1,157 $ 1,120 $ 1,939 $ 5,123 Software license updates and product support 1,892 1,835 1,914 2,008 7,649 -------- -------- -------- -------- -------- Database and Middleware Revenues $ 2,798 $ 2,992 $ 3,034 $ 3,947 $ 12,772 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES New software licenses 27% 4% (4%) (10%) 0% Software license updates and product support 26% 17% 16% 12% 18% Database and Middleware Revenues 27% 12% 8% 0% 10% CONSTANT CURRENCY GROWTH RATES (2) New software licenses 23% 12% 6% (1%) 7% Software license updates and product support 22% 24% 25% 23% 23% Database and Middleware Revenues 22% 19% 17% 10% 16% -------- -------- -------- -------- -------- APPLICATIONS REVENUES New software licenses $ 331 $ 469 $ 396 $ 805 $ 2,000 Software license updates and product support 1,043 1,015 1,003 1,044 4,105 -------- -------- -------- -------- -------- Applications Revenues $ 1,374 $ 1,484 $ 1,399 $ 1,849 $ 6,105 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES New software licenses (12%) (15%) (12%) (19%) (16%) Software license updates and product support 18% 9% 3% 0% 7% Applications Revenues 9% 0% (2%) (9%) (2%) CONSTANT CURRENCY GROWTH RATES (2) New software licenses (14%) (9%) (4%) (11%) (10%) Software license updates and product support 13% 15% 11% 9% 12% Applications Revenues 5% 6% 7% (1%) 4% Fiscal 2010 ------------------------------------------------ Q1 Q2 Q3 Q4 TOTAL -------- -------- -------- -------- -------- SOFTWARE REVENUES DATABASE & MIDDLEWARE REVENUES New software licenses $ 711 $ 1,175 $ 1,241 $ 2,280 $ 5,406 Software license updates and product support 2,065 2,131 2,191 2,309 8,696 -------- -------- -------- -------- -------- Database and Middleware Revenues $ 2,776 $ 3,306 $ 3,432 $ 4,589 $ 14,102 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES New software licenses (22%) 1% 11% 18% 6% Software license updates and product support 9% 16% 14% 15% 14% Database and Middleware Revenues (1%) 10% 13% 16% 10% CONSTANT CURRENCY GROWTH RATES (2) New software licenses (19%) (5%) 5% 18% 4% Software license updates and product support 14% 12% 9% 13% 12% Database and Middleware Revenues 4% 5% 8% 16% 9% -------- -------- -------- -------- -------- APPLICATIONS REVENUES New software licenses $ 317 $ 478 $ 477 $ 855 $ 2,127 Software license updates and product support 1,052 1,116 1,106 1,122 4,396 -------- -------- -------- -------- -------- Applications Revenues $ 1,369 $ 1,594 $ 1,583 $ 1,977 $ 6,523 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES New software licenses (4%) 2% 21% 6% 6% Software license updates and product support 1% 10% 10% 8% 7% Applications Revenues 0% 7% 13% 7% 7% CONSTANT CURRENCY GROWTH RATES (2) New software licenses 0% (3%) 15% 7% 5% Software license updates and product support 6% 6% 5% 6% 6% Applications Revenues 4% 3% 8% 6% 5% (1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding. (2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods. ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE AND HARDWARE SYSTEMS PRODUCTS REVENUES ANALYSIS (1) ($ in millions) Fiscal 2009 ------------------------------------------------ Q1 Q2 Q3 Q4 TOTAL -------- -------- -------- -------- -------- AMERICAS Database & Middleware $ 354 $ 471 $ 449 $ 840 $ 2,114 Applications 182 280 224 416 1,102 -------- -------- -------- -------- -------- New Software License Revenues $ 536 $ 751 $ 673 $ 1,256 $ 3,216 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ - $ - $ - ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware 18% 5% (7%) (9%) (2%) Applications (9%) (9%) (11%) (25%) (16%) New Software License Revenues 7% 0% (9%) (15%) (7%) Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware 17% 10% (1%) (6%) 2% Applications (10%) (6%) (8%) (22%) (14%) New Software License Revenues 6% 3% (4%) (12%) (4%) Hardware Systems Products Revenues * * * * * -------- -------- -------- -------- -------- EUROPE / MIDDLE EAST / AFRICA Database & Middleware $ 326 $ 431 $ 446 $ 759 $ 1,962 Applications 94 126 125 282 627 -------- -------- -------- -------- -------- New Software License Revenues $ 420 $ 557 $ 571 $ 1,041 $ 2,589 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ - $ - $ - ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware 28% 2% 0% (14%) (2%) Applications (23%) (28%) (12%) (11%) (17%) New Software License Revenues 11% (7%) (3%) (13%) (6%) Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware 20% 16% 15% 1% 10% Applications (26%) (16%) 2% 5% (6%) New Software License Revenues 5% 7% 12% 2% 6% Hardware Systems Products Revenues * * * * * -------- -------- -------- -------- -------- ASIA PACIFIC Database & Middleware $ 226 $ 255 $ 225 $ 340 $ 1,047 Applications 55 63 47 107 271 -------- -------- -------- -------- -------- New Software License Revenues $ 281 $ 318 $ 272 $ 447 $ 1,318 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ - $ - $ - ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware 45% 4% (3%) (1%) 7% Applications 1% (13%) (18%) (11%) (11%) New Software License Revenues 34% 0% (6%) (3%) 3% Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware 38% 8% 1% 5% 11% Applications (1%) (2%) (2%) (4%) (3%) New Software License Revenues 28% 5% 1% 3% 7% Hardware Systems Products Revenues * * * * * -------- -------- -------- -------- -------- TOTAL COMPANY Database & Middleware $ 906 $ 1,157 $ 1,120 $ 1,939 $ 5,123 Applications 331 469 396 805 2,000 -------- -------- -------- -------- -------- New Software License Revenues $ 1,237 $ 1,626 $ 1,516 $ 2,744 $ 7,123 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ - $ - $ - ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware 27% 4% (4%) (10%) 0% Applications (12%) (15%) (12%) (19%) (16%) New Software License Revenues 14% (3%) (6%) (13%) (5%) Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware 23% 12% 6% (1%) 7% Applications (14%) (9%) (4%) (11%) (10%) New Software License Revenues 10% 5% 3% (4%) 1% Hardware Systems Products Revenues * * * * * Fiscal 2010 ------------------------------------------------ Q1 Q2 Q3 Q4 TOTAL -------- -------- -------- -------- -------- AMERICAS Database & Middleware $ 310 $ 492 $ 540 $ 1,123 $ 2,465 Applications 185 286 283 485 1,239 -------- -------- -------- -------- -------- New Software License Revenues $ 495 $ 778 $ 823 $ 1,608 $ 3,704 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ 131 $ 617 $ 747 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware (12%) 4% 20% 34% 17% Applications 2% 2% 26% 16% 12% New Software License Revenues (7%) 4% 22% 28% 15% Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware (11%) 2% 16% 32% 15% Applications 6% 1% 23% 15% 11% New Software License Revenues (5%) 1% 18% 26% 14% Hardware Systems Products Revenues * * * * * -------- -------- -------- -------- -------- EUROPE / MIDDLE EAST / AFRICA Database & Middleware $ 224 $ 429 $ 456 $ 751 $ 1,859 Applications 90 119 134 261 604 -------- -------- -------- -------- -------- New Software License Revenues $ 314 $ 548 $ 590 $ 1,012 $ 2,463 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ 95 $ 390 $ 485 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware (31%) (1%) 2% (1%) (5%) Applications (5%) (6%) 7% (7%) (4%) New Software License Revenues (25%) (2%) 3% (3%) (5%) Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware (26%) (10%) (3%) 6% (5%) Applications 3% (14%) 1% (2%) (3%) New Software License Revenues (20%) (11%) (2%) 4% (4%) Hardware Systems Products Revenues * * * * * -------- -------- -------- -------- -------- ASIA PACIFIC Database & Middleware $ 177 $ 254 $ 245 $ 406 $ 1,082 Applications 42 73 60 109 284 -------- -------- -------- -------- -------- New Software License Revenues $ 219 $ 327 $ 305 $ 515 $ 1,366 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ 47 $ 226 $ 274 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware (22%) 0% 9% 19% 3% Applications (24%) 17% 29% 2% 5% New Software License Revenues (22%) 3% 12% 15% 4% Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware (22%) (10%) 1% 14% (3%) Applications (23%) 2% 16% (3%) (2%) New Software License Revenues (22%) (8%) 4% 10% (3%) Hardware Systems Products Revenues * * * * * -------- -------- -------- -------- -------- TOTAL COMPANY Database & Middleware $ 711 $ 1,175 $ 1,241 $ 2,280 $ 5,406 Applications 317 478 477 855 2,127 -------- -------- -------- -------- -------- New Software License Revenues $ 1,028 $ 1,653 $ 1,718 $ 3,135 $ 7,533 -------- -------- -------- -------- -------- Hardware Systems Products Revenues $ - $ - $ 273 $ 1,233 $ 1,506 ======== ======== ======== ======== ======== AS REPORTED GROWTH RATES Database & Middleware (22%) 1% 11% 18% 6% Applications (4%) 2% 21% 6% 6% New Software License Revenues (17%) 2% 13% 14% 6% Hardware Systems Products Revenues * * * * * CONSTANT CURRENCY GROWTH RATES (2) Database & Middleware (19%) (5%) 5% 18% 4% Applications 0% (3%) 15% 7% 5% New Software License Revenues (14%) (5%) 8% 15% 4% Hardware Systems Products Revenues * * * * * (1) The sum of the quarterly financial information may vary from year-to-date financial information due to rounding. (2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2009 and 2008 for the fiscal 2010 and fiscal 2009 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods. * Not meaningful APPENDIX A ORACLE CORPORATION FISCAL 2010 FINANCIAL RESULTS EXPLANATION OF NON-GAAP MEASURES
To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
- Software license updates and product support and hardware systems support deferred revenues: Business combination accounting rules require us to account for the fair value of software license updates and product support contracts and hardware systems support contracts assumed in connection with our acquisitions. Because these support contracts are typically one year in duration, our GAAP revenues for the one year period subsequent to our acquisition of a business do not reflect the full amount of support revenues on these assumed support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our software license updates and product support revenues and hardware systems support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustment to these support revenues is useful to investors as a measure of the ongoing performance of our business. We have historically experienced high renewal rates on our software license updates and product support contracts and our objective is to increase the renewal rates on acquired and new hardware systems support contracts; however, we cannot be certain that our customers will renew our software license updates and product support contracts or our hardware systems support contracts.
- Hardware systems products expenses: We have excluded the effects of the fair value adjustments to our inventories acquired from Sun that were sold to customers in the periods presented, which resulted in the exclusion of these adjustments from our hardware systems products expenses and net income measures. Business combination accounting rules require us to account for inventories assumed from our acquisitions at their fair values. The non-GAAP adjustment to our hardware systems products expenses is intended to reflect the hardware systems products expenses that would have been otherwise recorded by Sun as a standalone entity upon the sale of these inventories. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we do not expect the fair value adjustments to our inventories to recur in future periods with respect to the Sun acquisition and, therefore, we expect that these adjustments will not impact our future operating expenses. Investors should note that other factors may affect the future values of our inventories and hardware systems products expenses. If we assume inventories in future acquisitions, we will be required to assess their fair values, which may result in fair value adjustments to those inventories.
- Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.
- Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.
- Acquisition related and other expenses; and restructuring expenses: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses from our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments after the measurement period or purchase price allocation period has ended and certain other operating expenses, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses generally diminish over time with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.
Contributing Sources
