Exhibit 99.1
 | News Release |
| Contacts: | Krista Bessinger Oracle Investor Relations (650) 506-4073 | Bob Wynne Oracle Corporate Communications (650) 506-5834 |
ORACLE REPORTS Q3 GAAP EPS UP 40% TO 14 CENTS, NON-GAAP EPS UP 21% TO 19 CENTS
GAAP Applications New License Revenues Up 77%, GAAP Total Revenues Up 18% to $3.5 Billion
REDWOOD SHORES, Calif., March 20, 2006 — Oracle Corporation (NASDAQ: ORCL) today announced that in Q3 fiscal 2006 GAAP earnings per share were $0.14, up 40% compared to the same quarter last year. Third quarter GAAP revenues were up 18% to $3.5 billion, while quarterly GAAP net income was up 42% to $765 million. Total GAAP software revenues were up 20% to $2.8 billion with GAAP database and middleware new license revenues up 5% and GAAP applications new license revenues up 77%. GAAP services revenues were up 9% to $671 million compared to the same quarter last year.
Non-GAAP earnings per share were $0.19 in Q3, up 21% compared to the same quarter last year. Non-GAAP net income was up 23% to $1 billion compared to Q3 last year.
“We reported record revenues for the quarter and delivered non-GAAP EPS of 19 cents,” said Oracle President and CFO, Safra Catz. “Our non-GAAP operating margins reached record levels for the quarter as well, exceeding all previous third quarter results.”
“SAP’s strongest geographical region is Europe,” said Oracle President, Charles Phillips. “So we are especially pleased that in Europe our applications new license revenue grew in excess of 100% year-over-year. It’s very satisfying to be doing well right in SAP’s backyard.”
“Oracle’s product strategy is based on a combination of innovations and acquisitions,” said CEO, Larry Ellison. “Over the last several weeks we announced our internally developed Secure Enterprise Search technology, and the completion of the Siebel acquisition. As a result, Oracle now has strong product offerings in both Search and Software as a Service. These two markets are red hot and will be engines for growth for Oracle and the entire software industry for years to come.”
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Oracle Corporation is the world’s largest enterprise software company. For more information about Oracle, including supplemental financial information, please visit Oracle on the web atwww.oracle.com/investor or call Investor Relations at (650) 506-4073.
“Safe Harbor” Statement: Statements in this press release relating to Oracle’s future plans 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 could adversely affect our revenue growth and profitability through reductions in IT budgets and expenditures. (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) We cannot assure market acceptance of new products or new versions of existing products. (4) We have an active acquisition program (including our recent acquisition of Siebel Systems, Inc.), and our acquisitions may not be successful, may involve unanticipated costs or other integration issues, or may disrupt our existing operations. (5) Periodic changes to our pricing model and sales organization could temporarily disrupt operations and cause a decline or delay in sales. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions, and could require us to reduce prices. 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, as amended, and Form 10-Q, particularly under the heading “Factors That May Affect Our Future Results or the Market Price of Our Stock.” 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 onSEC Filings on Oracle’s Investor Relations website athttp://www.oracle.com/investor. All information set forth in this release is current as of March 20, 2006. Oracle undertakes no duty to update any statement in light of new information or future events.
ORACLE CORPORATION
Q3 FISCAL 2006 QUARTER TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
| Three Months Ended February 28, | Three Months Ended February 28, | % Increase (Decrease) in US $ | % Increase (Decrease) in Constant Currency (1) | |||||||||||||||||
| 2006 | % of Revenues | 2005 | % of Revenues | |||||||||||||||||
REVENUES | ||||||||||||||||||||
New software licenses | $ | 1,096 | 32% | $ | 947 | 32% | 16% | 20% | ||||||||||||
Software license updates and product support | 1,703 | 49% | 1,389 | 47% | 23% | 27% | ||||||||||||||
Software Revenues | 2,799 | 81% | 2,336 | 79% | 20% | 24% | ||||||||||||||
Services | 671 | 19% | 614 | 21% | 9% | 13% | ||||||||||||||
Total Revenues | 3,470 | 100% | 2,950 | 100% | 18% | 22% | ||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Sales and marketing | 756 | 22% | 668 | 22% | 13% | 17% | ||||||||||||||
Software license updates and product support | 178 | 5% | 161 | 5% | 11% | 15% | ||||||||||||||
Cost of services | 612 | 18% | 555 | 19% | 10% | 14% | ||||||||||||||
Research and development | 467 | 14% | 411 | 14% | 13% | 14% | ||||||||||||||
General and administrative | 146 | 4% | 146 | 5% | 0% | 3% | ||||||||||||||
Amortization of intangible assets | 148 | 4% | 81 | 3% | 83% | 83% | ||||||||||||||
Acquisition related | 84 | 2% | 51 | 2% | 63% | 63% | ||||||||||||||
Restructuring | 27 | 1% | 107 | 4% | (75% | ) | (75% | ) | ||||||||||||
Total Operating Expenses | 2,418 | 70% | 2,180 | 74% | 11% | 14% | ||||||||||||||
OPERATING INCOME | 1,052 | 30% | 770 | 26% | 37% | 45% | ||||||||||||||
Interest expense | (49 | ) | (1% | ) | (58 | ) | (2% | ) | (15% | ) | (15% | ) | ||||||||
Non-operating income, net | 75 | 2% | 59 | 2% | 27% | 28% | ||||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,078 | 31% | 771 | 26% | 40% | 48% | ||||||||||||||
Provision for income taxes | 313 | 9% | 231 | 8% | 35% | 38% | ||||||||||||||
NET INCOME | $ | 765 | 22% | $ | 540 | 18% | 42% | 53% | ||||||||||||
EARNINGS PER SHARE: | ||||||||||||||||||||
Basic | $ | 0.15 | $ | 0.11 | 39% | |||||||||||||||
Diluted | $ | 0.14 | $ | 0.10 | 40% | |||||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||
Basic | 5,207 | 5,122 | 2% | |||||||||||||||||
Diluted | 5,304 | 5,230 | 1% | |||||||||||||||||
| (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, 2005, 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 strengthened relative to major international currencies in the three months ended February 28, 2006 compared with the corresponding prior year period, reducing revenue growth by 4 percentage points, operating expense growth by 3 percentage points and operating income growth by 8 percentage points. |
ORACLE CORPORATION
Q3 FISCAL 2006 QUARTER TO DATE
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
(in millions, except per share data)
| Three Months Ended February 28, | % Increase (Decrease) in US $ | ||||||||||||||||||||||||
2006 GAAP | Adj. | 2006 Non-GAAP | 2005 GAAP | Adj. | 2005 Non-GAAP | GAAP | Non-GAAP | ||||||||||||||||||
TOTAL REVENUES (2) | $ | 3,470 | $ | 64 | $ | 3,534 | $ | 2,950 | $ | 143 | $ | 3,093 | 18% | 14% | |||||||||||
TOTAL SOFTWARE REVENUES (2) | $ | 2,799 | $ | 64 | $ | 2,863 | $ | 2,336 | $ | 143 | $ | 2,479 | 20% | 16% | |||||||||||
New software licenses | 1,096 | — | 1,096 | 947 | — | 947 | 16% | 16% | |||||||||||||||||
Software license updates and product support (2) | 1,703 | 64 | 1,767 | 1,389 | 143 | 1,532 | 23% | 15% | |||||||||||||||||
TOTAL OPERATING EXPENSES | $ | 2,418 | $ | (267 | ) | $ | 2,151 | $ | 2,180 | $ | (249 | ) | $ | 1,931 | 11% | 11% | |||||||||
Stock-based compensation (3) | 8 | (8 | ) | — | 10 | (10 | ) | — | * | * | |||||||||||||||
Amortization of intangible assets (4) | 148 | (148 | ) | — | 81 | (81 | ) | — | 83% | 0% | |||||||||||||||
Acquisition related | 84 | (84 | ) | — | 51 | (51 | ) | — | 63% | 0% | |||||||||||||||
Restructuring | 27 | (27 | ) | — | 107 | (107 | ) | — | (75% | ) | 0% | ||||||||||||||
OPERATING INCOME | $ | 1,052 | $ | 331 | $ | 1,383 | $ | 770 | $ | 392 | $ | 1,162 | 37% | 19% | |||||||||||
OPERATING MARGIN % | 30% | 39% | 26% | 38% | 16% | 4% | |||||||||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | $ | 1,078 | $ | 331 | $ | 1,409 | $ | 771 | $ | 392 | $ | 1,163 | 40% | 21% | |||||||||||
Income tax effect on above adjustments (5) | 313 | 96 | 409 | 231 | 118 | 349 | 35% | 17% | |||||||||||||||||
NET INCOME | $ | 765 | $ | 235 | $ | 1,000 | $ | 540 | $ | 274 | $ | 814 | 42% | 23% | |||||||||||
DILUTED EARNINGS PER SHARE | $ | 0.14 | $ | 0.19 | $ | 0.10 | $ | 0.16 | 40% | 21% | |||||||||||||||
* not meaningful | |||||||||||||||||||||||||
| (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) | Estimated revenues related to assumed support contracts, as of February 28, 2006, that will not be recognized in future periods due to business combination accounting rules are as follows: |
| Year Ended May 31, | |||
2006 | $ | 87 | |
2007 | 137 | ||
2008 | 9 | ||
Total | $ | 233 | |
| (3) | As of February 28, 2006, the portion of the intrinsic value of unvested options assumed from acquired companies related to future service, which is approximately $42, is recorded as deferred stock-based compensation on our consolidated balance sheet and will be amortized using the accelerated expense attribution method over the remaining vesting period. |
| Stock-based compensation is included in the following GAAP operating expenses in the third quarter of fiscal 2006 and 2005: |
| Three Months Ended February 28, 2006 | Three Months Ended February 28, 2005 | |||||||||||||||||
| GAAP | Adj. | Non-GAAP | GAAP | Adj. | Non-GAAP | |||||||||||||
Sales and marketing | $ | 2 | $ | (2) | $ | — | $ | 2 | $ | (2) | $ | — | ||||||
Software license updates and product support | 1 | (1) | — | 1 | (1) | — | ||||||||||||
Cost of services | 2 | (2) | — | 3 | (3) | — | ||||||||||||
Research and development | 3 | (3) | — | 3 | (3) | — | ||||||||||||
General and administrative | — | — | — | 1 | (1) | — | ||||||||||||
Total stock-based compensation | $ | 8 | $ | (8) | $ | — | $ | 10 | $ | (10) | $ | — | ||||||
| (4) | Estimated future amortization expense related to intangible assets as of February 28, 2006 is as follows: |
| Year Ended May 31, | |||
2006 | $ | 183 | |
2007 | 734 | ||
2008 | 724 | ||
2009 | 719 | ||
2010 | 613 | ||
Thereafter | 1,730 | ||
Total | $ | 4,703 | |
| (5) | The income tax provision was calculated reflecting a tax rate of 29.0% and 30.0% in the third quarter of fiscal 2006 and 2005, respectively. |
ORACLE CORPORATION
Q3 FISCAL 2006 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
| Nine Months Ended February 28, | Nine Months Ended February 28, | % Increase (Decrease) in US $ | % Increase (Decrease) in Constant Currency (1) | |||||||||||||||||
| 2006 | % of Revenues | 2005 | % of Revenues | |||||||||||||||||
REVENUES | ||||||||||||||||||||
New software licenses | $ | 2,783 | 29% | $ | 2,481 | 31% | 12% | 15% | ||||||||||||
Software license updates and product support | 4,764 | 50% | 3,816 | 48% | 25% | 27% | ||||||||||||||
Software Revenues | 7,547 | 79% | 6,297 | 79% | 20% | 22% | ||||||||||||||
Services | 1,982 | 21% | 1,624 | 21% | 22% | 24% | ||||||||||||||
Total Revenues | 9,529 | 100% | 7,921 | 100% | 20% | 22% | ||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Sales and marketing | 2,076 | 22% | 1,703 | 22% | 22% | 24% | ||||||||||||||
Software license updates and product support | 514 | 6% | 438 | 6% | 17% | 19% | ||||||||||||||
Cost of services | 1,757 | 19% | 1,423 | 18% | 24% | 25% | ||||||||||||||
Research and development | 1,335 | 14% | 1,034 | 13% | 29% | 29% | ||||||||||||||
General and administrative | 410 | 4% | 401 | 5% | 2% | 3% | ||||||||||||||
Amortization of intangible assets | 398 | 4% | 97 | 1% | 308% | 308% | ||||||||||||||
Acquisition related | 122 | 1% | 103 | 1% | 18% | 18% | ||||||||||||||
Restructuring | 38 | 0% | 107 | 1% | (65% | ) | (64% | ) | ||||||||||||
Total Operating Expenses | 6,650 | 70% | 5,306 | 67% | 25% | 27% | ||||||||||||||
OPERATING INCOME | 2,879 | 30% | 2,615 | 33% | 10% | 13% | ||||||||||||||
Interest expense | (86 | ) | (1% | ) | (69 | ) | (1% | ) | 25% | 26% | ||||||||||
Non-operating income, net | 138 | 2% | 117 | 2% | 18% | 19% | ||||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,931 | 31% | 2,663 | 34% | 10% | 13% | ||||||||||||||
Provision for income taxes | 850 | 9% | 799 | 10% | 6% | 8% | ||||||||||||||
NET INCOME | $ | 2,081 | 22% | $ | 1,864 | 24% | 12% | 16% | ||||||||||||
EARNINGS PER SHARE: | ||||||||||||||||||||
Basic | $ | 0.40 | $ | 0.36 | 11% | |||||||||||||||
Diluted | $ | 0.40 | $ | 0.36 | 11% | |||||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||
Basic | 5,169 | 5,133 | 1% | |||||||||||||||||
Diluted | 5,262 | 5,229 | 1% | |||||||||||||||||
| (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, 2005, 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 strengthened relative to major international currencies in the nine months ended February 28, 2006 compared with the corresponding prior year period, reducing revenue growth by 2 percentage points, operating expense growth by 2 percentage points and operating income growth by 3 percentage points. |
ORACLE CORPORATION
Q3 FISCAL 2006 YEAR TO DATE
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
(in millions, except per share data)
| Nine Months Ended February 28, | % Increase (Decrease) in US $ | ||||||||||||||||||||||||
2006 GAAP | Adj. | 2006 Non-GAAP | 2005 GAAP | Adj. | 2005 Non-GAAP | GAAP | Non-GAAP | ||||||||||||||||||
TOTAL REVENUES (2) | $ | 9,529 | $ | 305 | $ | 9,834 | $ | 7,921 | $ | 143 | $ | 8,064 | 20% | 22% | |||||||||||
TOTAL SOFTWARE REVENUES (2) | $ | 7,547 | $ | 305 | $ | 7,852 | $ | 6,297 | $ | 143 | $ | 6,440 | 20% | 22% | |||||||||||
New software licenses | 2,783 | — | 2,783 | 2,481 | — | 2,481 | 12% | 12% | |||||||||||||||||
Software license updates and product support (2) | 4,764 | 305 | 5,069 | 3,816 | 143 | 3,959 | 25% | 28% | |||||||||||||||||
TOTAL OPERATING EXPENSES | $ | 6,650 | $ | (582 | ) | $ | 6,068 | $ | 5,306 | $ | (317 | ) | $ | 4,989 | 25% | 22% | |||||||||
Stock-based compensation (3) | 24 | (24 | ) | — | 10 | (10 | ) | — | * | * | |||||||||||||||
Amortization of intangible assets (4) | 398 | (398 | ) | — | 97 | (97 | ) | — | 308% | 0% | |||||||||||||||
Acquisition related | 122 | (122 | ) | — | 103 | (103 | ) | — | 18% | 0% | |||||||||||||||
Restructuring | 38 | (38 | ) | — | 107 | (107 | ) | — | (65% | ) | 0% | ||||||||||||||
OPERATING INCOME | $ | 2,879 | $ | 887 | $ | 3,766 | $ | 2,615 | $ | 460 | $ | 3,075 | 10% | 22% | |||||||||||
OPERATING MARGIN % | 30% | 38% | 33% | 38% | (8% | ) | 0% | ||||||||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | $ | 2,931 | $ | 887 | $ | 3,818 | $ | 2,663 | $ | 460 | $ | 3,123 | 10% | 22% | |||||||||||
Income tax effect on above adjustments (5) | 850 | 257 | 1,107 | 799 | 138 | 937 | 6% | 18% | |||||||||||||||||
NET INCOME | $ | 2,081 | $ | 630 | $ | 2,711 | $ | 1,864 | $ | 322 | $ | 2,186 | 12% | 24% | |||||||||||
DILUTED EARNINGS PER SHARE | $ | 0.40 | $ | 0.52 | $ | 0.36 | $ | 0.42 | 11% | 23% | |||||||||||||||
* not meaningful | |||||||||||||||||||||||||
| (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) | Estimated revenues related to assumed support contracts, as of February 28, 2006, that will not be recognized in future periods due to business combination accounting rules are as follows: |
| Year Ended May 31, | |||
2006 | $ | 87 | |
2007 | 137 | ||
2008 | 9 | ||
Total | $ | 233 | |
| (3) | As of February 28, 2006, the portion of the intrinsic value of unvested options assumed from acquired companies related to future service, which is approximately $42, is recorded as deferred stock-based compensation on our consolidated balance sheet and will be amortized using the accelerated expense attribution method over the remaining vesting period. |
| Stock-based compensation is included in the following GAAP operating expenses in the first nine months of fiscal 2006 and 2005: |
| Nine Months Ended February 28, 2006 | Nine Months Ended February 28, 2005 | |||||||||||||||||
| GAAP | Adj. | Non-GAAP | GAAP | Adj. | Non-GAAP | |||||||||||||
Sales and marketing | $ | 5 | $ | (5) | $ | — | $ | 2 | $ | (2) | $ | — | ||||||
Software license updates and product support | 2 | (2) | — | 1 | (1) | — | ||||||||||||
Cost of services | 6 | (6) | — | 3 | (3) | — | ||||||||||||
Research and development | 11 | (11) | — | 3 | (3) | — | ||||||||||||
General and administrative | — | — | — | 1 | (1) | — | ||||||||||||
Total stock-based compensation | $ | 24 | $ | (24) | $ | — | $ | 10 | $ | (10) | $ | — | ||||||
| (4) | Estimated future amortization expense related to intangible assets as of February 28, 2006 is as follows: |
| Year Ended May 31, | |||
2006 | $ | 183 | |
2007 | 734 | ||
2008 | 724 | ||
2009 | 719 | ||
2010 | 613 | ||
Thereafter | 1,730 | ||
Total | $ | 4,703 | |
| (5) | The income tax provision was calculated reflecting a tax rate of 29.0% and 30.0% in the first nine months of fiscal 2006 and 2005, respectively. |
ORACLE CORPORATION
Q3 FISCAL 2006 FINANCIAL RESULTS
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
($ in millions)
| February 28, 2006 | May 31, 2005 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 6,921 | $ | 3,894 | |||
Marketable securities | 843 | 877 | |||||
Trade receivables, net | 2,201 | 2,570 | |||||
Deferred tax assets | 738 | 486 | |||||
Other current assets | 496 | 621 | |||||
Total Current Assets | 11,199 | 8,448 | |||||
Non-Current Assets: | |||||||
Property, net | 1,375 | 1,442 | |||||
Intangible assets, net | 4,703 | 3,373 | |||||
Goodwill | 10,075 | 7,003 | |||||
Other assets | 1,112 | 421 | |||||
Total Non-Current Assets | 17,265 | 12,239 | |||||
TOTAL ASSETS | $ | 28,464 | $ | 20,687 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Short-term borrowings and current portion of long-term debt | $ | 341 | $ | 2,693 | |||
Accounts payable | 233 | 230 | |||||
Income taxes payable | 678 | 904 | |||||
Accrued compensation and related benefits | 858 | 923 | |||||
Accrued restructuring | 247 | 156 | |||||
Deferred revenues | 2,467 | 2,289 | |||||
Other current liabilities | 1,042 | 868 | |||||
Total Current Liabilities | 5,866 | 8,063 | |||||
Non-Current Liabilities: | |||||||
Long-term debt | 5,741 | 159 | |||||
Deferred tax liabilities | 799 | 1,010 | |||||
Accrued restructuring | 521 | 120 | |||||
Deferred revenues | 111 | 126 | |||||
Other long-term liabilities | 383 | 372 | |||||
Total Non-Current Liabilities | 7,555 | 1,787 | |||||
Stockholders’ Equity | 15,043 | 10,837 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 28,464 | $ | 20,687 | |||
| (1) | Certain prior period balances have been reclassified to conform to the current period presentation. |
ORACLE CORPORATION
Q3 FISCAL 2006 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
($ in millions)
| Nine Months Ended February 28, | ||||||||
| 2006 | 2005 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 2,081 | $ | 1,864 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 160 | 142 | ||||||
Amortization of intangible assets | 398 | 97 | ||||||
Deferred income taxes | (115 | ) | (117 | ) | ||||
Minority interests in income | 27 | 27 | ||||||
Amortization of stock-based compensation | 33 | 10 | ||||||
Non-cash restructuring | — | 33 | ||||||
In-process research and development | 86 | 34 | ||||||
Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||
Decrease in trade receivables | 670 | 824 | ||||||
Decrease in prepaid expenses and other assets | 123 | 195 | ||||||
Decrease in accounts payable and other liabilities | (382 | ) | (455 | ) | ||||
Decrease in income taxes payable | (201 | ) | (121 | ) | ||||
(Decrease) Increase in deferred revenues | (18 | ) | 24 | |||||
Net cash provided by operating activities | 2,862 | 2,557 | ||||||
Cash Flows From Investing Activities: | ||||||||
Purchases of marketable securities | (1,473 | ) | (6,545 | ) | ||||
Proceeds from maturities and sale of marketable securities | 3,083 | 10,537 | ||||||
Acquisitions, net of cash acquired | (3,932 | ) | (9,892 | ) | ||||
Purchase of equity investment | (605 | ) | — | |||||
Capital expenditures | (161 | ) | (150 | ) | ||||
Proceeds from sales of property | 140 | — | ||||||
Increase in other assets | (4 | ) | (5 | ) | ||||
Net cash used for investing activities | (2,952 | ) | (6,055 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Payments for repurchase of common stock | (324 | ) | (1,095 | ) | ||||
Proceeds from issuance of common stock | 333 | 360 | ||||||
Proceeds from borrowings, net of financing costs | 12,636 | 9,200 | ||||||
Payments of debt | (9,446 | ) | (2,000 | ) | ||||
Distributions to minority interests | (39 | ) | (44 | ) | ||||
Net cash provided by financing activities | 3,160 | 6,421 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (43 | ) | 160 | |||||
Net increase in cash and cash equivalents | 3,027 | 3,083 | ||||||
Cash and cash equivalents at beginning of period | 3,894 | 4,138 | ||||||
Cash and cash equivalents at end of period | $ | 6,921 | $ | 7,221 | ||||
| (1) | Certain prior period balances have been reclassified to conform to the current period presentation. |
ORACLE CORPORATION
Q3 FISCAL 2006 FINANCIAL RESULTS
FREE CASH FLOW—TRAILING 4-QUARTERS (1)
($ in millions)
| Fiscal 2005 | Fiscal 2006 | ||||||||||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 (2) | Q4 | ||||||||||||||||||||||||
GAAP Operating Cash Flow | $ | 3,350 | $ | 3,386 | $ | 3,575 | $ | 3,552 | $ | 3,596 | $ | 3,509 | $ | 3,857 | |||||||||||||||||
Capital Expenditures (3) | (147 | ) | (178 | ) | (195 | ) | (188 | ) | (206 | ) | (182 | ) | (199 | ) | |||||||||||||||||
Free Cash Flow | $ | 3,203 | $ | 3,208 | $ | 3,380 | $ | 3,364 | $ | 3,390 | $ | 3,327 | $ | 3,658 | |||||||||||||||||
% Growth | 16% | 12% | 27% | 12% | 6% | 4% | 8% | ||||||||||||||||||||||||
GAAP Net Income | $ | 2,749 | $ | 2,948 | $ | 2,854 | $ | 2,886 | $ | 2,896 | $ | 2,878 | $ | 3,103 | |||||||||||||||||
Free Cash Flow as a % of Net Income | 117% | 109% | 118% | 117% | 117% | 116% | 118% | ||||||||||||||||||||||||
| (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) | Free cash flow and free cash flow as a percent of GAAP net income for the first nine months of fiscal 2006 and first nine months of fiscal 2005: |
| First Nine Months of Fiscal 2005 | First Nine Months of Fiscal 2006 | |||||||
GAAP Operating Cash Flow | $ | 2,557 | $ | 2,862 | ||||
Capital Expenditures | (150 | ) | (161 | ) | ||||
Free Cash Flow | $ | 2,407 | $ | 2,701 | ||||
% Growth | 18% | 12% | ||||||
GAAP Net Income | $ | 1,864 | $ | 2,081 | ||||
Free Cash Flow as a % of Net Income | 129% | 130% | ||||||
| (3) | Represents capital expenditures as reported in cash flows from investing activities of our cash flow statements presented in accordance with U.S. generally accepted accounting principles. |
ORACLE CORPORATION
Q3 FISCAL 2006 FINANCIAL RESULTS
SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)
(in millions, except headcount data)
| Fiscal 2005 | Fiscal 2006 | |||||||||||||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | TOTAL | Q1 | Q2 | Q3 | Q4 | TOTAL | |||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||
New software licenses | $ | 563 | $ | 971 | $ | 947 | $ | 1,609 | $ | 4,091 | $ | 629 | $ | 1,058 | $ | 1,096 | $ | 2,783 | ||||||||||||||||
Software license updates and product support | 1,176 | 1,252 | 1,389 | 1,514 | 5,330 | 1,502 | 1,559 | 1,703 | 4,764 | |||||||||||||||||||||||||
Software Revenues | 1,739 | 2,223 | 2,336 | 3,123 | 9,421 | 2,131 | 2,617 | 2,799 | 7,547 | |||||||||||||||||||||||||
Consulting | 355 | 395 | 470 | 589 | 1,810 | 481 | 506 | 501 | 1,489 | |||||||||||||||||||||||||
On Demand | 71 | 72 | 76 | 80 | 299 | 84 | 87 | 96 | 266 | |||||||||||||||||||||||||
Education | 50 | 66 | 68 | 86 | 269 | 72 | 82 | 74 | 227 | |||||||||||||||||||||||||
Services Revenues | 476 | 533 | 614 | 755 | 2,378 | 637 | 675 | 671 | 1,982 | |||||||||||||||||||||||||
Total Revenues | $ | 2,215 | $ | 2,756 | $ | 2,950 | $ | 3,878 | $ | 11,799 | $ | 2,768 | $ | 3,292 | $ | 3,470 | $ | 9,529 | ||||||||||||||||
AS REPORTED REVENUE GROWTH RATES | ||||||||||||||||||||||||||||||||||
New software licenses | 7% | 14% | 12% | 23% | 16% | 12% | 9% | 16% | 12% | |||||||||||||||||||||||||
Software license updates and product support | 14% | 12% | 18% | 26% | 18% | 28% | 25% | 23% | 25% | |||||||||||||||||||||||||
Software Revenues | 11% | 13% | 15% | 24% | 17% | 23% | 18% | 20% | 20% | |||||||||||||||||||||||||
Consulting | (10% | ) | 0% | 26% | 40% | 14% | 36% | 28% | 7% | 22% | ||||||||||||||||||||||||
On Demand | 18% | 11% | 23% | 12% | 16% | 18% | 20% | 26% | 22% | |||||||||||||||||||||||||
Education | (11% | ) | (4% | ) | 37% | 32% | 13% | 42% | 25% | 9% | 24% | |||||||||||||||||||||||
Services Revenues | (7% | ) | 1% | 27% | 35% | 14% | 34% | 26% | 9% | 22% | ||||||||||||||||||||||||
Total Revenues | 7% | 10% | 18% | 26% | 16% | 25% | 19% | 18% | 20% | |||||||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | ||||||||||||||||||||||||||||||||||
New software licenses | 3% | 9% | 8% | 20% | 12% | 10% | 12% | 20% | 15% | |||||||||||||||||||||||||
Software license updates and product support | 10% | 8% | 15% | 22% | 14% | 26% | 27% | 27% | 27% | |||||||||||||||||||||||||
Software Revenues | 8% | 8% | 12% | 21% | 13% | 21% | 20% | 24% | 22% | |||||||||||||||||||||||||
Consulting | (13% | ) | (4% | ) | 23% | 36% | 10% | 34% | 31% | 10% | 24% | |||||||||||||||||||||||
On Demand | 14% | 7% | 20% | 9% | 12% | 17% | 22% | 29% | 23% | |||||||||||||||||||||||||
Education | (14% | ) | (9% | ) | 33% | 28% | 8% | 40% | 27% | 13% | 26% | |||||||||||||||||||||||
Services Revenues | (10% | ) | (3% | ) | 23% | 32% | 10% | 32% | 29% | 13% | 24% | |||||||||||||||||||||||
Total Revenues | 3% | 6% | 14% | 23% | 12% | 23% | 22% | 22% | 22% | |||||||||||||||||||||||||
GEOGRAPHIC REVENUES | ||||||||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||
Americas | $ | 1,091 | $ | 1,292 | $ | 1,437 | $ | 1,977 | $ | 5,798 | $ | 1,475 | $ | 1,733 | $ | 1,848 | $ | 5,057 | ||||||||||||||||
Europe, Middle East & Africa | 778 | 1,062 | 1,088 | 1,361 | 4,288 | 883 | 1,090 | 1,164 | 3,136 | |||||||||||||||||||||||||
Asia Pacific | 346 | 402 | 425 | 540 | 1,713 | 410 | 469 | 458 | 1,336 | |||||||||||||||||||||||||
Total Revenues | $ | 2,215 | $ | 2,756 | $ | 2,950 | $ | 3,878 | $ | 11,799 | $ | 2,768 | $ | 3,292 | $ | 3,470 | $ | 9,529 | ||||||||||||||||
HEADCOUNT | ||||||||||||||||||||||||||||||||||
GEOGRAPHIC AREA | ||||||||||||||||||||||||||||||||||
Domestic | 16,458 | 16,347 | 21,774 | 21,544 | 21,198 | 21,133 | 23,256 | |||||||||||||||||||||||||||
International | 25,610 | 26,233 | 29,107 | 28,328 | 28,318 | 30,021 | 32,326 | |||||||||||||||||||||||||||
Total Company | 42,068 | 42,580 | 50,881 | 49,872 | 49,516 | 51,154 | 55,582 | |||||||||||||||||||||||||||
| (1) | The sum of the quarterly financial information may vary from the year-to-date financial information due to rounding. |
ORACLE CORPORATION
Q3 FISCAL 2006 FINANCIAL RESULTS
SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1)
($ in millions)
| Fiscal 2005 | Fiscal 2006 | ||||||||||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total | ||||||||||||||||||||||
APPLICATIONS REVENUES | |||||||||||||||||||||||||||||||
New software licenses | $ | 69 | $ | 215 | $ | 152 | $ | 350 | $ | 785 | $ | 127 | $ | 266 | $ | 269 | $ | 662 | |||||||||||||
Software license updates and product support | 238 | 254 | 351 | 445 | 1,288 | 466 | 502 | 608 | 1,576 | ||||||||||||||||||||||
Software Revenues | 307 | 469 | 503 | 795 | 2,073 | 593 | 768 | 877 | 2,238 | ||||||||||||||||||||||
AS REPORTED REVENUE GROWTH RATES | |||||||||||||||||||||||||||||||
New software licenses | (36% | ) | 57% | 9% | 52% | 28% | 84% | 24% | 77% | 52% | |||||||||||||||||||||
Software license updates and product support | 8% | 7% | 48% | 86% | 38% | 96% | 98% | 73% | 87% | ||||||||||||||||||||||
Software Revenues | (6% | ) | 25% | 34% | 69% | 34% | 93% | 64% | 74% | 75% | |||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | |||||||||||||||||||||||||||||||
New software licenses | (38% | ) | 51% | 7% | 49% | 25% | 82% | 27% | 82% | 54% | |||||||||||||||||||||
Software license updates and product support | 4% | 3% | 43% | 80% | 33% | 93% | 101% | 79% | 90% | ||||||||||||||||||||||
Software Revenues | (9% | ) | 21% | 30% | 65% | 30% | 91% | 67% | 80% | 78% | |||||||||||||||||||||
DATABASE & MIDDLEWARE REVENUES | |||||||||||||||||||||||||||||||
New software licenses | $ | 494 | $ | 756 | $ | 795 | $ | 1,259 | $ | 3,306 | $ | 502 | $ | 792 | $ | 827 | $ | 2,121 | |||||||||||||
Software license updates and product support | 938 | 998 | 1,038 | 1,070 | 4,042 | 1,036 | 1,057 | 1,095 | 3,188 | ||||||||||||||||||||||
Software Revenues | 1,432 | 1,754 | 1,833 | 2,329 | 7,349 | 1,538 | 1,849 | 1,922 | 5,309 | ||||||||||||||||||||||
AS REPORTED REVENUE GROWTH RATES | |||||||||||||||||||||||||||||||
New software licenses | 18% | 5% | 12% | 16% | 13% | 2% | 5% | 4% | 4% | ||||||||||||||||||||||
Software license updates and product support | 15% | 14% | 11% | 11% | 12% | 10% | 6% | 6% | 7% | ||||||||||||||||||||||
Software Revenues | 16% | 10% | 11% | 14% | 13% | 7% | 5% | 5% | 6% | ||||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | |||||||||||||||||||||||||||||||
New software licenses | 14% | 1% | 9% | 13% | 9% | 0% | 8% | 8% | 6% | ||||||||||||||||||||||
Software license updates and product support | 11% | 10% | 7% | 7% | 9% | 9% | 8% | 9% | 9% | ||||||||||||||||||||||
Software Revenues | 12% | 6% | 8% | 10% | 9% | 6% | 8% | 9% | 8% | ||||||||||||||||||||||
| (1) | The sum of the quarterly financial information may vary from year-to-date financial information due to rounding. |
ORACLE CORPORATION
Q3 FISCAL 2006 FINANCIAL RESULTS
SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE REVENUES ANALYSIS (1) (2)
($ in millions)
| Fiscal 2005 | Fiscal 2006 | ||||||||||||||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | TOTAL | Q1 | Q2 | Q3 | Q4 | TOTAL | ||||||||||||||||||||||||||
AMERICAS | |||||||||||||||||||||||||||||||||||
Database & Middleware | $ | 197 | $ | 285 | $ | 289 | $ | 542 | $ | 1,313 | $ | 194 | $ | 327 | $ | 334 | $ | 856 | |||||||||||||||||
Applications | 30 | 116 | 91 | 229 | 466 | 75 | 163 | 148 | 386 | ||||||||||||||||||||||||||
New Software License Revenues | $ | 227 | $ | 401 | $ | 380 | $ | 771 | $ | 1,779 | $ | 269 | $ | 490 | $ | 482 | $ | 1,242 | |||||||||||||||||
AS REPORTED GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 22% | (5% | ) | 14% | 29% | 16% | (2% | ) | 15% | 16% | 11% | ||||||||||||||||||||||||
Applications | (27% | ) | 53% | 7% | 71% | 39% | 150% | 41% | 61% | 62% | |||||||||||||||||||||||||
New Software License Revenues | 12% | 7% | 12% | 39% | 21% | 19% | 22% | 27% | 23% | ||||||||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 21% | (5% | ) | 12% | 27% | 15% | (4% | ) | 13% | 14% | 9% | ||||||||||||||||||||||||
Applications | (27% | ) | 51% | 7% | 69% | 38% | 148% | 40% | 60% | 61% | |||||||||||||||||||||||||
New Software License Revenues | 11% | 7% | 11% | 37% | 20% | 17% | 21% | 25% | 22% | ||||||||||||||||||||||||||
EUROPE / MIDDLE EAST / AFRICA | |||||||||||||||||||||||||||||||||||
Database & Middleware | $ | 158 | $ | 304 | $ | 325 | $ | 483 | $ | 1,270 | $ | 164 | $ | 282 | $ | 316 | $ | 763 | |||||||||||||||||
Applications | 28 | 80 | 44 | 76 | 227 | 38 | 75 | 96 | 208 | ||||||||||||||||||||||||||
New Software License Revenues | $ | 186 | $ | 384 | $ | 369 | $ | 559 | $ | 1,497 | $ | 202 | $ | 357 | $ | 412 | $ | 971 | |||||||||||||||||
AS REPORTED GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 10% | 16% | 12% | 7% | 11% | 4% | (7% | ) | (3% | ) | (3% | ) | |||||||||||||||||||||||
Applications | (49% | ) | 67% | 7% | 6% | 5% | 38% | (6% | ) | 119% | 38% | ||||||||||||||||||||||||
New Software License Revenues | (6% | ) | 23% | 11% | 7% | 10% | 9% | (7% | ) | 12% | 4% | ||||||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 3% | 5% | 6% | 3% | 4% | 3% | 0% | 6% | 3% | ||||||||||||||||||||||||||
Applications | (53% | ) | 54% | 2% | 3% | 0% | 36% | 1% | 138% | 46% | |||||||||||||||||||||||||
New Software License Revenues | (12% | ) | 13% | 6% | 3% | 4% | 8% | 0% | 22% | 10% | |||||||||||||||||||||||||
ASIA PACIFIC | |||||||||||||||||||||||||||||||||||
Database & Middleware | $ | 131 | $ | 160 | $ | 168 | $ | 222 | $ | 682 | $ | 134 | $ | 176 | $ | 170 | $ | 478 | |||||||||||||||||
Applications | 11 | 19 | 17 | 45 | 92 | 14 | 28 | 25 | 68 | ||||||||||||||||||||||||||
New Software License Revenues | $ | 142 | $ | 179 | $ | 185 | $ | 267 | $ | 774 | $ | 148 | $ | 203 | $ | 195 | $ | 546 | |||||||||||||||||
AS REPORTED GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 27% | 7% | 8% | 10% | 12% | 2% | 9% | 1% | 4% | ||||||||||||||||||||||||||
Applications | 0% | 46% | 21% | 80% | 46% | 28% | 48% | 52% | 45% | ||||||||||||||||||||||||||
New Software License Revenues | 25% | 10% | 9% | 18% | 15% | 4% | 13% | 5% | 8% | ||||||||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 21% | 3% | 3% | 7% | 8% | 0% | 14% | 6% | 7% | ||||||||||||||||||||||||||
Applications | 0% | 38% | 23% | 72% | 42% | 23% | 50% | 60% | 47% | ||||||||||||||||||||||||||
New Software License Revenues | 19% | 6% | 5% | 14% | 11% | 2% | 18% | 11% | 11% | ||||||||||||||||||||||||||
TOTAL COMPANY | |||||||||||||||||||||||||||||||||||
Database & Middleware | $ | 486 | $ | 749 | $ | 782 | $ | 1,247 | $ | 3,265 | $ | 492 | $ | 785 | $ | 820 | $ | 2,097 | |||||||||||||||||
Applications | 69 | 215 | 152 | 350 | 785 | 127 | 266 | 269 | 662 | ||||||||||||||||||||||||||
New Software License Revenues | $ | 555 | $ | 964 | $ | 934 | $ | 1,597 | $ | 4,050 | $ | 619 | $ | 1,051 | $ | 1,089 | $ | 2,759 | |||||||||||||||||
AS REPORTED GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 19% | 5% | 12% | 16% | 13% | 1% | 5% | 5% | 4% | ||||||||||||||||||||||||||
Applications | (36% | ) | 57% | 9% | 52% | 28% | 84% | 24% | 77% | 52% | |||||||||||||||||||||||||
New Software License Revenues | 8% | 14% | 11% | 22% | 15% | 12% | 9% | 17% | 13% | ||||||||||||||||||||||||||
CONSTANT CURRENCY GROWTH RATES | |||||||||||||||||||||||||||||||||||
Database & Middleware | 14% | 1% | 8% | 13% | 9% | 0% | 8% | 9% | 6% | ||||||||||||||||||||||||||
Applications | (38% | ) | 51% | 7% | 49% | 25% | 82% | 27% | 82% | 54% | |||||||||||||||||||||||||
New Software License Revenues | 4% | 9% | 8% | 20% | 12% | 10% | 12% | 21% | 15% | ||||||||||||||||||||||||||
| (1) | The sum of the quarterly financial information may vary from year-to-date financial information due to rounding. |
| (2) | New Software License Revenues presented exclude documentation and miscellaneous revenues. |
APPENDIX A
ORACLE CORPORATION
Q3 FISCAL 2006 QUARTER TO DATE AND YEAR TO DATE
EXPLANATION OF NON-GAAP MEASURES
Due to a series of acquisitions, our results of operations have undergone significant change. To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the table, which exclude certain business combination accounting entries and expenses related to acquisitions and other significant expenses 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 effect:
| • | Support deferred revenue: Business combination accounting rules require us to account for the fair value of support contracts assumed in connection with acquisitions. Because these are typically one-year contracts, our GAAP software license updates and support revenues for the one year period subsequent to acquisitions do not reflect the full amount of revenue on assumed contracts that would have otherwise been recorded by the acquired entities. The non-GAAP adjustment is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business, because we have historically experienced high renewal rates on these contracts although we cannot assure that customers will renew these contracts. For further information on this non-GAAP adjustment, see footnote 2 to our Reconciliation of Selected GAAP Measures to Non-GAAP Measures. |
| • | Stock-based compensation: Certain of our operating expenses include stock-based compensation related to unvested stock options assumed in connection with acquisitions. We believe it is useful to highlight the effect of stock-based compensation related to acquisitions because, in compliance with our historical practices under SFAS 123, we do not otherwise expense Oracle stock-based compensation in the current or in past reporting periods. However, stock-based compensation is a key incentive offered to our employees, and we believe it contributed to the revenue earned during the period and will contribute to our future revenue generation. Stock-based compensation expenses will recur in future periods. For further information on the effect of this non-GAAP adjustment on our operating expense line items, see footnote 3 to our Reconciliation of Selected GAAP Measures to Non-GAAP Measures. |
| • | Amortization of intangible assets: We have excluded the effect of amortization of intangibles from our non-GAAP operating expenses. We believe this is useful because, prior to the PeopleSoft acquisition, we did not incur significant charges of this nature, and the exclusion of this amount helps investors understand a significant reason why our operating expenses increased compared to the prior period. Investors should note that the use of intangible assets contributed to revenue earned during the period and will contribute to future revenue generation and should also note that these amortization expenses are recurring. See footnote 4 to our Reconciliation of Selected GAAP Measures to Non-GAAP Measures for information on our estimated future amortization expense related to intangible assets. |
| • | Acquisition related charges and restructuring costs: We incurred significant expenses in connection with acquisitions, principally PeopleSoft and Siebel, that we would not have otherwise incurred. Acquisition related charges primarily consist of in-process research and development expenses, integration-related professional services, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), personnel related costs for transitional employees as well as costs associated with our tender offer for PeopleSoft prior to the agreement date. Stock-based compensation included in acquisition related charges resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the terms of the options. Restructuring costs consist of Oracle employee severance and Oracle duplicate facility closures in connection with acquisitions. We believe it is useful for investors to understand the effect of these expenses on our cost structure. Although acquisition related charges and restructuring costs are not recurring with respect to past acquisitions, we will incur these charges in connection with future acquisitions. |