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@CloudExpo: News Item

Oracle Reports GAAP EPS of $0.23, Non-GAAP EPS of $0.38

New Software Licenses Up 13%, Applications New Licenses Up 21%

ORACLE CORPORATION                       Q3 FISCAL 2010 FINANCIAL RESULTS               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                   ($ in millions, except per share data)                     Three Months Ended February 28,        %      % Increase               --------------------------------------  Increase  (Decrease)                           % of                % of   (Decrease) in Constant                 2010    Revenues    2009    Revenues  in US $  Currency (1)               --------  --------  --------  --------  --------  ----------  REVENUES   New software    licenses   $  1,718     27%    $  1,516     28%       13%         8%   Software    license    updates    and product    support       3,297     51%       2,917     53%       13%         8%               --------  --------  --------  --------     Software      Revenues    5,015     78%       4,433     81%       13%         8%               --------  --------  --------  --------   Hardware    systems    products        273      4%           -      0%        *          *   Hardware    systems    support         185      3%           -      0%        *          *               --------  --------  --------  --------     Hardware      Systems      Revenues      458      7%           -      0%        *          *               --------  --------  --------  --------   Services         931     15%       1,020     19%       (9%)      (13%)               --------  --------  --------  --------        Total         Reven-         ues      6,404    100%       5,453    100%       17%        12%               --------  --------  --------  --------  OPERATING  EXPENSES   Sales and    marketing     1,241     19%       1,054     19%       18%        13%   Software    license    updates    and product    support         281      4%         256      5%       10%         5%   Hardware    systems    products        206      3%           -      0%        *          *   Hardware    systems    support         116      2%           -      0%        *          *   Services         816     13%         855     16%       (5%)       (9%)   Research and    development     823     13%         677     12%       22%        20%   General and    adminis-    trative         236      4%         192      4%       23%        20%   Amortization    of intangible    assets          502      8%         437      8%       15%        15%   Acquisition    related and    other            34      0%          27      0%       28%        28%   Restruc-    turing          306      5%          15      0%    1,968%     1,867%               --------  --------  --------  --------        Total         Oper-         ating         Expen-         ses      4,561     71%       3,513     64%       30%        26%               --------  --------  --------  --------  OPERATING  INCOME          1,843     29%       1,940     36%       (5%)      (12%)   Interest    expense        (186)    (3%)       (154)    (3%)      20%        20%   Non-oper-    ating    income    (expense),    net             (75)    (1%)         24      0%     (413%)     (367%)               --------  --------  --------  --------  INCOME BEFORE  PROVISION  FOR INCOME  TAXES           1,582     25%       1,810     33%      (13%)      (20%)               --------  --------  --------  --------   Provision    for income    taxes           393      6%         481      9%      (18%)      (25%)               --------  --------  --------  --------  NET INCOME    $  1,189     19%    $  1,329     24%      (10%)      (18%)               ========  ========  ========  ========  EARNINGS PER  SHARE:   Basic       $   0.24            $   0.27   Diluted     $   0.23            $   0.26 WEIGHTED AVERAGE  COMMON SHARES  OUTSTANDING:   Basic          5,015               5,005   Diluted        5,076               5,056   (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. The United States dollar weakened     relative to most major international currencies in the three months     ended February 28, 2010 compared with the corresponding prior year     period, increasing revenues by 5 percentage points, operating expenses     by 4 percentage points and operating income by 7 percentage points.    * Not meaningful                                ORACLE CORPORATION                       Q3 FISCAL 2010 FINANCIAL RESULTS        RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)                    ($ in millions, except per share data)                               Three Months Ended February 28,                 ----------------------------------------------------------                   2010                2010      2009                2009                   GAAP      Adj.    Non-GAAP    GAAP      Adj.    Non-GAAP                 --------  --------  --------  --------  --------  --------  TOTAL REVENUES  (3) (4)        $  6,404  $     65  $  6,469  $  5,453  $     51  $  5,504  TOTAL SOFTWARE  REVENUES (3)   $  5,015  $     26  $  5,041  $  4,433  $     51  $  4,484   New software    licenses        1,718         -     1,718     1,516         -     1,516   Software    license    updates and    product    support (3)     3,297        26     3,323     2,917        51     2,968  TOTAL HARDWARE  SYSTEMS  REVENUES (4)   $    458  $     39  $    497  $      -  $      -  $      -   Hardware    systems    products          273         -       273         -         -         -   Hardware    systems    support (4)       185        39       224         -         -         -  TOTAL OPERATING  EXPENSES       $  4,561  $   (978) $  3,583  $  3,513  $   (564) $  2,949   Hardware    systems    products          206       (24)      182         -         -         -   Stock-based    compensation    (5)               112      (112)        -        85       (85)        -   Amortization    of intangible    assets (6)        502      (502)        -       437      (437)        -   Acquisition    related and    other              34       (34)        -        27       (27)        -   Restructuring      306      (306)        -        15       (15)        -  OPERATING  INCOME         $  1,843  $  1,043  $  2,886  $  1,940  $    615  $  2,555  OPERATING  MARGIN %             29%                 45%       36%                 46%  INCOME TAX  EFFECTS (7)    $    393  $    287  $    680  $    481  $    164  $    645  NET INCOME      $  1,189  $    756  $  1,945  $  1,329  $    451  $  1,780  DILUTED  EARNINGS PER  SHARE          $   0.23            $   0.38  $   0.26            $   0.35  DILUTED  WEIGHTED  AVERAGE  COMMON  SHARES  OUTSTANDING       5,076         -     5,076     5,056         -     5,056                                            % Increase               % Increase (Decrease)   (Decrease) in                       in US $      Constant Currency (2)                 ------------------  ------------------                   GAAP    Non-GAAP    GAAP    Non-GAAP                 --------  --------  --------  --------  TOTAL REVENUES  (3) (4)           17%       18%       12%       12%  TOTAL SOFTWARE  REVENUES (3)      13%       12%        8%        7%   New software    licenses        13%       13%        8%        8%   Software    license    updates and    product    support (3)     13%       12%        8%        7%  TOTAL HARDWARE  SYSTEMS  REVENUES (4)       *         *         *         *   Hardware    systems    products         *         *         *         *   Hardware    systems    support(4)       *         *         *         *  TOTAL OPERATING  EXPENSES          30%       21%       26%       17%   Hardware    systems    products         *         *         *         *   Stock-based    compensation    (5)             33%        *        33%        *   Amortization    of intangible    assets (6)      15%        *        15%        *   Acquisition    related and    other           28%        *        28%        *   Restructuring 1,968%        *     1,867%        *  OPERATING  INCOME            (5%)      13%      (12%)       7%  OPERATING  MARGIN %      (680) bp  (180) bp  (779) bp  (224) bp  INCOME TAX  EFFECTS (7)      (18%)       5%      (25%)      (1%)  NET INCOME        (10%)       9%      (18%)       3%  DILUTED  EARNINGS PER  SHARE            (11%)       9%      (18%)       2%  DILUTED  WEIGHTED  AVERAGE  COMMON  SHARES  OUTSTANDING        0%        0%        0%        0%   (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 February 28, 2010, approximately $35 million, $60 million and     $25 million in estimated revenues related to assumed software support     contracts will not be recognized for the remainder of fiscal 2010,     fiscal 2011 and fiscal 2012, respectively, due to business combination     accounting rules.  (4) As of February 28, 2010, approximately $89 million, $148 million,     $35 million and $11 million in estimated revenues related to hardware     systems support contracts will not be recognized for the remainder of     fiscal 2010, 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                       February 28, 2010             February 28, 2009                 ----------------------------- -----------------------------                   GAAP      Adj.    Non-GAAP    GAAP      Adj.    Non-GAAP                 --------- --------  --------- --------- --------  ---------   Sales and    marketing    $      21 $    (21) $       - $      16 $    (16) $       -   Software    license    updates    and product    support              4       (4)         -         3       (3)         -   Hardware    systems    products             2       (2)         -         -        -          -   Hardware    systems    support              1       (1)         -         -        -          -   Services              4       (4)         -         3       (3)         -   Research    and    development         46      (46)         -        39      (39)         -   General and    administrative      34      (34)         -        24      (24)         -                 --------- --------  --------- --------- --------  ---------     Subtotal          112     (112)         -        85      (85)         -                 --------- --------  --------- --------- --------  ---------   Acquisition    related and    other               10      (10)         -         3       (3)         -                 --------- --------  --------- --------- --------  ---------     Total      stock-based      compensa-      tion       $     122 $   (122) $       - $      88 $    (88) $       -                 ========= ========  ========= ========= ========  =========   (6) Estimated future annual amortization expense related to intangible     assets as of February 28, 2010 is as follows:    Remainder of    Fiscal 2010  $     609    Fiscal 2011      2,259    Fiscal 2012      1,988    Fiscal 2013      1,620    Fiscal 2014      1,340    Fiscal 2015      1,006    Thereafter         631                 ---------     Total      intangible      assets      subject to      amortization   9,453   In-process    research and    development        415                 ---------     Total       $   9,868                 =========   (7) Income tax effects were calculated reflecting an effective GAAP tax     rate of 24.8% and 26.6% in the third quarter of fiscal 2010 and 2009,     respectively, and an effective non-GAAP tax rate of 25.9% and 26.6% in     the third quarter of fiscal 2010 and 2009, respectively. The     differences between our GAAP and non-GAAP tax rates in the third     quarter of fiscal 2010 were due to differences in jurisdictional tax     rates and the related tax benefits attributable to our restructuring     expenses in this period.    * Not meaningful                                ORACLE CORPORATION                Q3 FISCAL 2010 YEAR TO DATE FINANCIAL RESULTS              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                  ($ in millions, except per share data)                     Nine Months Ended February 28,         %      % Increase               --------------------------------------  Increase  (Decrease)                           % of                % of   (Decrease) in Constant                 2010    Revenues    2009    Revenues  in US $  Currency (1)               --------  --------  --------  --------  --------  ----------  REVENUES   New software    licenses   $  4,399     25%    $  4,379     27%        0%       (3%)   Software    license    updates    and product    support       9,661     56%       8,702     53%       11%       10%               --------  --------  --------  --------     Software      Revenues   14,060     81%      13,081     80%        7%        5%               --------  --------  --------  --------   Hardware    systems    products        273      2%           -      0%        *         *   Hardware    systems    support         185      1%           -      0%        *         *               --------  --------  --------  --------     Hardware      Systems      Revenues      458      3%           -      0%        *         *               --------  --------  --------  --------   Services       2,797     16%       3,310     20%      (15%)     (17%)               --------  --------  --------  --------       Total        Reve-        nues     17,315    100%      16,391    100%        6%        4%               --------  --------  --------  --------  OPERATING  EXPENSES   Sales and    marketing     3,335     19%       3,312     20%        1%       (1%)   Software    license    updates and    product    support         771      5%         795      5%       (3%)      (4%)   Hardware    systems    products        206      1%           -      0%        *         *   Hardware    systems    support         116      1%           -      0%        *         *   Services       2,429     14%       2,820     17%      (14%)     (15%)   Research    and    development   2,191     12%       2,037     12%        8%        8%   General and    admini-    strative        619      4%         571      4%        8%        8%   Amortization    of intangible    assets        1,369      8%       1,276      8%        7%        7%   Acquisition    related    and other        50      0%          98      1%      (48%)     (46%)   Restructuring    467      3%          46      0%      926%      906%               --------  --------  --------  --------       Total        Oper-        ating        Expen-        ses      11,553     67%      10,955     67%        5%        5%               --------  --------  --------  --------  OPERATING  INCOME          5,762     33%       5,436     33%        6%        2%   Interest    expense        (553)    (3%)       (471)    (3%)      17%       17%   Non-operating    income    (expense),    net             (41)     0%         114      1%     (136%)    (136%)               --------  --------  --------  --------  INCOME BEFORE  PROVISION FOR  INCOME TAXES    5,168     30%       5,079     31%        2%       (3%)               --------  --------  --------  --------   Provision    for income    taxes         1,396      8%       1,377      8%        1%       (3%)               --------  --------  --------  --------  NET INCOME    $  3,772     22%    $  3,702     23%        2%       (3%)               ========  ========  ========  ========  EARNINGS PER  SHARE:   Basic       $   0.75            $   0.73   Diluted     $   0.74            $   0.72 WEIGHTED AVERAGE  COMMON SHARES  OUTSTANDING:   Basic          5,012               5,095   Diluted        5,067               5,159   (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. The United States dollar slightly     weakened relative to most major international currencies in the nine     months ended February 28, 2010 compared with the corresponding prior     year period, increasing revenues by 2 percentage points and operating     income by 4 percentage points.    * Not meaningful                                ORACLE CORPORATION                 Q3 FISCAL 2010 YEAR TO DATE FINANCIAL RESULTS       RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)                    ($ in millions, except per share data)                               Nine Months Ended February 28,                 ----------------------------------------------------------                   2010                2010      2009                2009                   GAAP      Adj.    Non-GAAP    GAAP      Adj.    Non-GAAP                 --------  --------  --------  --------  --------  --------  TOTAL REVENUES  (3) (4)        $ 17,315  $     88  $ 17,403  $ 16,391  $    222  $ 16,613  TOTAL SOFTWARE  REVENUES (3)   $ 14,060  $     49  $ 14,109  $ 13,081  $    222  $ 13,303   New software    licenses        4,399         -     4,399     4,379         -     4,379   Software    license    updates and    product    support (3)     9,661        49     9,710     8,702       222     8,924  TOTAL HARDWARE  SYSTEMS  REVENUES (4)   $    458  $     39  $    497  $      -  $      -  $      -   Hardware    systems    products          273         -       273         -         -         -   Hardware    systems    support (4)       185        39       224         -         -         -  TOTAL OPERATING  EXPENSES       $ 11,553  $ (2,210) $  9,343  $ 10,955  $ (1,680) $  9,275   Hardware    systems    products          206       (24)      182         -         -         -   Stock-based    compensation    (5)               300      (300)        -       260      (260)        -   Amortization    of intangible    assets (6)      1,369    (1,369)        -     1,276    (1,276)        -   Acquisition    related and    other              50       (50)        -        98       (98)        -   Restructuring      467      (467)        -        46       (46)        -  OPERATING  INCOME         $  5,762  $  2,298  $  8,060  $  5,436  $  1,902  $  7,338  OPERATING  MARGIN %             33%                 46%       33%                 44%  INCOME TAX  EFFECTS (7)    $  1,396  $    624  $  2,020  $  1,377  $    535  $  1,912  NET INCOME      $  3,772  $  1,674  $  5,446  $  3,702  $  1,367  $  5,069  DILUTED  EARNINGS PER  SHARE          $   0.74            $   1.07  $   0.72            $   0.98  DILUTED  WEIGHTED AVERAGE  COMMON SHARES  OUTSTANDING       5,067         -     5,067     5,159         -     5,159                                            % Increase               % Increase (Decrease)   (Decrease) in                       in US $      Constant Currency (2)                 ------------------  ------------------                   GAAP    Non-GAAP    GAAP    Non-GAAP                 --------  --------  --------  --------  TOTAL REVENUES  (3) (4)           6%        5%        4%        3%  TOTAL SOFTWARE  REVENUES (3)      7%        6%        5%        4%   New software    licenses        0%        0%       (3%)      (3%)   Software    license    updates and    product    support (3)    11%        9%       10%        7%  TOTAL HARDWARE  SYSTEMS  REVENUES (4)      *         *         *         *   Hardware    systems    products        *         *         *         *   Hardware    systems    support (4)     *         *         *         *  TOTAL OPERATING  EXPENSES          5%        1%        5%        0%   Hardware    systems    products        *         *         *         *   Stock-based    compensation    (5)            15%        *        15%        *   Amortization    of intangible    assets (6)      7%        *         7%        *   Acquisition    related and    other         (48%)       *       (46%)       *   Restructuring  926%        *       906%        *  OPERATING  INCOME            6%       10%        2%        7%  OPERATING  MARGIN %         11 bp    214 bp   (63) bp    163 bp  INCOME TAX  EFFECTS (7)       1%        6%       (3%)       2%  NET INCOME         2%        7%       (3%)       4%  DILUTED  EARNINGS  PER SHARE         4%        9%       (1%)       6%   DILUTED   WEIGHTED   AVERAGE   COMMON   SHARES   OUTSTANDING      (2%)      (2%)     (2%)      (2%)   (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 February 28, 2010, approximately $35 million, $60 million and     $25 million in estimated revenues related to assumed software support     contracts will not be recognized for the remainder of fiscal 2010,     fiscal 2011 and fiscal 2012, respectively, due to business combination     accounting rules.  (4) As of February 28, 2010, approximately $89 million, $148 million,     $35 million and $11 million in estimated revenues related to hardware     systems support contracts will not be recognized for the remainder of     fiscal 2010, 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:                         Nine Months Ended             Nine Months Ended                       February 28, 2010             February 28, 2009                 ----------------------------- -----------------------------                   GAAP      Adj.    Non-GAAP    GAAP      Adj.    Non-GAAP                 --------- --------  --------- --------- --------  ---------   Sales and    marketing    $      57 $    (57) $       - $      51 $    (51) $       -   Software    license    updates and    product    support             12      (12)         -        10      (10)         -   Hardware    systems    products             2       (2)         -         -        -          -   Hardware    systems    support              1       (1)         -         -        -          -   Services             10      (10)         -         9       (9)         -   Research and    development        122     (122)         -       121     (121)         -   General and    administrative      96      (96)         -        69      (69)         -                 --------- --------  --------- --------- --------  ---------     Subtotal          300     (300)         -       260     (260)         -                 --------- --------  --------- --------- --------  ---------   Acquisition    related and    other               10      (10)         -        14      (14)         -                 --------- --------  --------- --------- --------  ---------     Total      stock-based      compensa-      tion       $     310 $   (310) $       - $     274 $   (274) $       -                 ========= ========  ========= ========= ========  =========   (6) Estimated future annual amortization expense related to intangible     assets as of February 28, 2010 is as follows:    Remainder of    Fiscal 2010  $     609    Fiscal 2011      2,259    Fiscal 2012      1,988    Fiscal 2013      1,620    Fiscal 2014      1,340    Fiscal 2015      1,006    Thereafter         631                 ---------     Total      intangible      assets      subject to      amortization   9,453   In-process    research    and development    415                 ---------        Total    $   9,868                 =========   (7) Income tax effects were calculated reflecting an effective GAAP tax     rate of 27.0% and 27.1% in the first nine months of fiscal 2010 and     2009, respectively, and an effective non-GAAP tax rate of 27.1% and     27.4% in the first nine months of fiscal 2010 and 2009, respectively.     The differences between our GAAP and non-GAAP tax rates in the first     nine months of fiscal 2010 were due to differences in jurisdictional     tax rates and the related tax benefits attributable to our     restructuring expenses in this period. In addition, our non-GAAP tax     rate in the first nine months of fiscal 2009 excludes the effect of an     adjustment to our non-current deferred tax liability associated with     acquired intangible assets.    * Not meaningful                                 ORACLE CORPORATION                       Q3 FISCAL 2010 FINANCIAL RESULTS                   CONDENSED CONSOLIDATED BALANCE SHEETS                              ($ in millions)                                                      February 28,   May 31,                                                       2010         2009                                                    -----------  ----------- ASSETS   Current Assets:     Cash and cash equivalents                      $     9,331  $     8,995     Marketable securities                                8,158        3,629     Trade receivables, net                               3,898        4,430     Inventories, net                                       315            -     Deferred tax assets                                    978          661     Prepaid expenses and other current assets            1,299          866                                                    -----------  -----------       Total Current Assets                              23,979       18,581   Non-Current Assets:     Property, plant and equipment, net                   2,869        1,922     Intangible assets, net                               9,868        7,269     Goodwill                                            20,415       18,842     Other assets                                         2,255          802                                                    -----------  -----------       Total Non-Current Assets                          35,407       28,835                                                    -----------  ----------- TOTAL ASSETS                                       $    59,386  $    47,416                                                    ===========  =========== LIABILITIES AND EQUITY   Current Liabilities:     Notes payable, current and other current      borrowings                                    $     4,220  $     1,001     Accounts payable                                       616          271     Accrued compensation and related benefits            1,452        1,409     Deferred revenues                                    5,389        4,592     Other current liabilities                            2,574        1,876                                                    -----------  -----------       Total Current Liabilities                         14,251        9,149   Non-Current Liabilities:     Notes payable and other non-current borrowings      11,498        9,237     Income taxes payable                                 3,275        2,423     Deferred tax liabilities                               339          480     Other non-current liabilities                        1,172          682                                                    -----------  -----------       Total Non-Current Liabilities                     16,284       12,822   Equity                                                28,851       25,445                                                    -----------  ----------- TOTAL LIABILITIES AND EQUITY                       $    59,386  $    47,416                                                    ===========  ===========                                ORACLE  CORPORATION                       Q3 FISCAL 2010 FINANCIAL RESULTS               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                              ($ in millions)                                                         Nine Months Ended                                                           February 28,                                                     ----------------------                                                        2010        2009                                                     ----------  ---------- Cash Flows From Operating Activities:   Net income                                        $    3,772  $    3,702   Adjustments to reconcile net income to net cash    provided by operating activities:     Depreciation                                           196         198     Amortization of intangible assets                    1,369       1,276     Deferred income taxes                                 (362)       (302)     Stock-based compensation                               310         274     Tax benefits on the exercise of stock options      and vesting of restricted stock-based awards          117         141     Excess tax benefits on the exercise of stock      options and vesting of restricted stock-based      awards                                                (71)        (92)     Other, net                                              79          68     Changes in operating assets and liabilities, net      of effects from acquisitions:        Decrease in trade receivables, net                1,614       1,848        Decrease in inventories, net                         18           -        Decrease in prepaid expenses and other assets       375         336        Decrease in accounts payable and other         liabilities                                       (842)     (1,097)        Decrease in income taxes payable                   (269)        (51)        Decrease in deferred revenues                      (136)        (54)                                                     ----------  ----------          Net cash provided by operating activities       6,170       6,247                                                     ----------  ---------- Cash Flows From Investing Activities:   Purchases of marketable securities and other    investments                                         (11,162)     (6,906)   Proceeds from maturities and sales of marketable    securities and other investments                      7,121       6,397   Acquisitions, net of cash acquired                    (5,567)     (1,165)   Capital expenditures                                    (161)       (491)                                                     ----------  ----------          Net cash used for investing activities         (9,769)     (2,165)                                                     ----------  ---------- Cash Flows From Financing Activities:   Payments for repurchases of common stock                (738)     (3,704)   Proceeds from issuances of common stock                  602         448   Payment of dividends to stockholders                    (753)          -   Proceeds from borrowings, net of issuance costs        6,420           -   Repayments of borrowings                              (1,708)         (4)   Excess tax benefits on the exercise of stock    options and vesting of restricted stock-based    awards                                                   71          92   Distributions to noncontrolling interests                (59)        (53)                                                     ----------  ----------          Net cash provided by (used for) financing           activities                                     3,835      (3,221)                                                     ----------  ---------- Effect of exchange rate changes on cash and cash  equivalents                                               100        (912)                                                     ----------  ---------- Net increase (decrease) in cash and cash  equivalents                                               336         (51)                                                     ----------  ---------- Cash and cash equivalents at beginning of period         8,995       8,262                                                     ----------  ---------- Cash and cash equivalents at end of period          $    9,331  $    8,211                                                     ==========  ==========                                ORACLE CORPORATION                       Q3 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  Capital  Expendi-  tures (2)     (479)   (486)   (539)   (529)   (261)   (230)   (199)              ------  ------  ------  ------  ------  ------  ------  Free Cash  Flow        $7,462  $7,603  $8,003  $7,726  $8,492  $8,424  $7,979              ======  ======  ======  ======  ======  ======  ======  % Growth over  prior year      20%     15%     14%      8%     14%     11%      0%   GAAP Net  Income      $5,758  $5,750  $5,739  $5,593  $5,640  $5,802  $5,663  Free Cash  Flow as a  % of Net  Income         130%    132%    139%    138%    151%    145%    141%   (1) To supplement our statements of cash flows presented on a GAAP     basis, we use non-GAAP measures of cash flows on a trailing     4-quarter basis to analyze cash flow generated from operations. We     believe free cash flow is also useful as one of the bases for     comparing our performance with our competitors. The presentation of     non-GAAP free cash flow is not meant to be considered in isolation or     as an alternative to net income as an indicator of our performance, or     as an alternative to cash flows from operating activities as a measure     of liquidity.  (2) Represents capital expenditures as reported in cash flows from     investing activities on our cash flow statements presented in     accordance with GAAP.                                   ORACLE CORPORATION                         Q3 FISCAL 2010 FINANCIAL RESULTS             SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)                                 ($ 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            $  4,399   Software license updates    and product support      3,117     3,247     3,297               9,661                          --------  --------  --------  --------  --------     Software Revenues       4,145     4,900     5,015              14,060    Hardware systems    products                     -         -       273                 273   Hardware systems support      -         -       185                 185                          --------  --------  --------  --------  --------     Hardware Systems      Revenues                   -         -       458                 458    Consulting                  663       692       651               2,006   On Demand                   180       188       211                 579   Education                    66        78        69                 212                          --------  --------  --------  --------  --------     Services Revenues         909       958       931               2,797                           --------  --------  --------  --------  --------        Total Revenues    $  5,054  $  5,858  $  6,404            $ 17,315                          ========  ========  ========  ========  ========  AS REPORTED REVENUE  GROWTH RATES   New software licenses       (17%)       2%       13%                  0%   Software license updates    and product support          6%       14%       13%                 11%     Software Revenues          (1%)       9%       13%                  7%    Hardware systems    products                     *         *         *                   *   Hardware systems support      *         *         *                   *     Hardware Systems      Revenues                   *         *         *                   *    Consulting                  (23%)     (18%)     (14%)               (19%)   On Demand                    (8%)      (1%)      10%                  1%   Education                   (34%)     (22%)      (4%)               (22%)     Services Revenues         (22%)     (15%)      (9%)               (15%)         Total Revenues          (5%)       4%       17%                  6%  CONSTANT CURRENCY GROWTH  RATES (2)   New software licenses       (14%)      (5%)       8%                 (3%)   Software license updates    and product support         11%        9%        8%                 10%     Software Revenues           4%        4%        8%                  5%    Hardware systems    products                     *         *         *                   *   Hardware systems support      *         *         *                   *     Hardware Systems      Revenues                   *         *         *                   *    Consulting                  (19%)     (22%)     (18%)               (20%)   On Demand                    (3%)      (4%)       6%                 (1%)   Education                   (30%)     (26%)      (8%)               (23%)     Services Revenues         (18%)     (19%)     (13%)               (17%)         Total Revenues          (1%)       0%       12%                  4%   GEOGRAPHIC REVENUES  REVENUES   Americas               $  2,671  $  2,979  $  3,284            $  8,934   Europe, Middle East &    Africa                   1,642     1,976     2,167               5,785   Asia Pacific                741       903       953               2,596                          --------  --------  --------  --------  --------        Total Revenues    $  5,054  $  5,858  $  6,404            $ 17,315                          ========  ========  ========  ========  ========  HEADCOUNT  GEOGRAPHIC AREA   Americas                 32,034    31,849    44,554   Europe, Middle East &    Africa                  16,839    16,491    23,566   Asia Pacific             35,766    35,026    38,372                          --------  --------  --------  --------  --------        Total Company       84,639    83,366   106,492                          ========  ========  ========  ========  ========   (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                       Q3 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            $  3,127   Software license    updates and product    support                  2,065     2,131     2,191               6,387                          --------  --------  --------  --------  --------       Database and        Middleware        Revenues          $  2,776  $  3,306  $  3,432            $  9,514                          ========  ========  ========  ========  ========  AS REPORTED GROWTH RATES   New software licenses       (22%)       1%       11%                 (2%)   Software license    updates and product    support                      9%       16%       14%                 13%       Database and        Middleware        Revenues                (1%)      10%       13%                  8%  CONSTANT CURRENCY GROWTH  RATES (2)   New software licenses       (19%)      (5%)       5%                 (5%)   Software license    updates and product    support                     14%       12%        9%                 12%       Database and        Middleware        Revenues                 4%        5%        8%                  6%  APPLICATIONS REVENUES   New software licenses  $    317  $    478  $    477            $  1,272   Software license    updates and product    support                  1,052     1,116     1,106               3,274                          --------  --------  --------  --------  --------       Applications        Revenues          $  1,369  $  1,594  $  1,583            $  4,546                          ========  ========  ========  ========  ========  AS REPORTED GROWTH RATES   New software licenses        (4%)       2%       21%                  6%   Software license    updates and product    support                      1%       10%       10%                  7%       Applications        Revenues                 0%        7%       13%                  7%  CONSTANT CURRENCY GROWTH  RATES (2)   New software licenses         0%       (3%)      15%                  4%   Software license    updates and product    support                      6%        6%        5%                  6%       Applications        Revenues                 4%        3%        8%                  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                      Q3 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            $  1,342   Applications                185       286       283                 754                          --------  --------  --------  --------  --------      New Software License       Revenues           $    495  $    778  $    823            $  2,096                          --------  --------  --------  --------  --------   Hardware Systems    Products Revenues     $      -  $      -  $    131            $    131                          ========  ========  ========  ========  ========  AS REPORTED GROWTH RATES   Database & Middleware       (12%)       4%       20%                  5%   Applications                  2%        2%       26%                 10%      New Software License       Revenues                 (7%)       4%       22%                  7%   Hardware Systems    Products Revenues            *         *         *                   *  CONSTANT CURRENCY GROWTH  RATES (2)   Database & Middleware       (11%)       2%       16%                  3%   Applications                  6%        1%       23%                  9%      New Software License       Revenues                 (5%)       1%       18%                  5%   Hardware Systems    Products Revenues            *         *         *                   *   EUROPE / MIDDLE EAST /  AFRICA    Database & Middleware  $    224  $    429  $    456            $  1,109   Applications                 90       119       134                 343                          --------  --------  --------  --------  --------      New Software License       Revenues           $    314  $    548  $    590            $  1,452                          --------  --------  --------  --------  --------   Hardware Systems    Products Revenues     $      -  $      -  $     95            $     95                          ========  ========  ========  ========  ========  AS REPORTED GROWTH RATES   Database & Middleware       (31%)      (1%)       2%                 (8%)   Applications                 (5%)      (6%)       7%                 (1%)      New Software License       Revenues                (25%)      (2%)       3%                 (6%)   Hardware Systems    Products Revenues            *         *         *                   *  CONSTANT CURRENCY GROWTH  RATES (2)   Database & Middleware       (26%)     (10%)      (3%)               (11%)   Applications                  3%      (14%)       1%                 (4%)      New Software License       Revenues                (20%)     (11%)      (2%)               (10%)   Hardware Systems    Products Revenues            *         *         *                   *   ASIA PACIFIC    Database & Middleware  $    177  $    254  $    245            $    676   Applications                 42        73        60                 175                          --------  --------  --------  --------  --------      New Software License       Revenues           $    219  $    327  $    305            $    851                          --------  --------  --------  --------  --------   Hardware Systems    Products Revenues     $      -  $      -  $     47            $     47                          ========  ========  ========  ========  ========  AS REPORTED GROWTH RATES   Database & Middleware       (22%)       0%        9%                 (4%)   Applications                (24%)      17%       29%                  7%      New Software License       Revenues                (22%)       3%       12%                 (2%)   Hardware Systems    Products Revenues            *         *         *                   *  CONSTANT CURRENCY GROWTH  RATES (2)   Database & Middleware       (22%)     (10%)       1%                (10%)   Applications                (23%)       2%       16%                 (2%)      New Software License       Revenues                (22%)      (8%)       4%                 (9%)   Hardware Systems    Products Revenues            *         *         *                   *   TOTAL COMPANY    Database & Middleware  $    711  $  1,175  $  1,241            $  3,127   Applications                317       478       477               1,272                          --------  --------  --------  --------  --------      New Software License       Revenues           $  1,028  $  1,653  $  1,718            $  4,399                          --------  --------  --------  --------  --------   Hardware Systems    Products Revenues     $      -  $      -  $    273            $    273                          ========  ========  ========  ========  ========  AS REPORTED GROWTH RATES   Database & Middleware       (22%)       1%       11%                 (2%)   Applications                 (4%)       2%       21%                  6%      New Software License       Revenues                (17%)       2%       13%                  0%   Hardware Systems    Products Revenues            *         *         *                   *  CONSTANT CURRENCY GROWTH  RATES (2)   Database & Middleware       (19%)      (5%)       5%                 (5%)   Applications                  0%       (3%)      15%                  4%      New Software License       Revenues                (14%)      (5%)       8%                 (3%)   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                       Q3 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.

 

 

Contact:
Ken Bond
Oracle Investor Relations
1.650.607.0349
Email Contact

Karen Tillman
Oracle Corporate Communications
1.650.607.0326
Email Contact

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