FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (TMF Boring)

Oracle Corporation
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500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-4073
http://www.oracle.com

ANN ARBOR, Mich. (June 17, 1997) /FOOLWIRE/ -- After the market closed, ORACLE CORP. announced results for its fiscal fourth quarter, which ended May 31, 1997, and for the 1997 fiscal year. Revenues increased 33% to a fourth quarter record of $1.948 billion, from $1.464 billion in the same period last year. Earnings increased 35% to $0.54 per share, compared to $0.40 per share in the same period last year.

CURRENCY IMPACT. As in recent quarters, the company experienced a negative impact of currency exchange rates. In Q4, that impact on revenues was four percentage points. So in local currencies, revenues increased 37%. For the year, revenues were up 35% in dollars, to $5.684 billion, or up 38% in local currencies.

TOUGH Q4 COMPARISON. The quarter presented a tough comparison for Oracle, because last year's fourth quarter was an exceptionally strong one, growing approximately 50% in local currencies. Despite that, the results this year were good. Licensing revenues grew 26% for the quarter, as compared with 26% for the full year. Services revenues grew 45% for the quarter and for the year. And total revenue increased 33% for the quarter and 35% for the year; the difference was due to a larger proportion of licenses revenues in the mix for the fourth quarter.

LARGE DEALS. Large deals (of $500,000 and over) were 50% of the total, as compared with 38% last year. That is due in part to the growth in Applications as a share of the total mix. Transactions for Applications tend to be somewhat larger as compared with other transactions.

GEOGRAPHIC RESULTS. Geographically, revenues were up 44% in the Americas for the quarter and for the year. EMEA (Europe, Middle East and Africa) increased 20% for the quarter and 22% for the year; European revenues were impacted negatively approximately 6 percentage points due to currency exchanges. Asia Pacific was up 25% for the quarter and 34% for the year. Quarterly results in Asia Pacific were below expectations, with some countries in that region being abnormally slow but also some comparisons suffering from exceptionally strong results last year (such as in Australia). Oracle management does not believe that the sluggish results in Asia Pacific in Q4 are indicative of any trend.

PRODUCT CONTRIBUTIONS. License revenues for server products grew 22% in the quarter and 27% for the year; the lower quarterly growth rate reflects an unusually strong quarter last year. Tools business was down 7% in the quarter and the year. Applications is by far the fastest growing part of the business, up 78% in the quarter and 62% for the year. Applications licenses and services totaled $1.161 billion for the year, or approximately 20% of Oracle's total annual revenues.

SERVICES. Revenues from support increased 43% for the quarter and 46% for the year. Consulting was up 53% for the quarter and 49% for the year; and education revenues grew 30% for the quarter and 27% for the year.

RESULTS BY PLATFORM. By operating system/platform, revenue increases were: UNIX, 22% for the quarter and 25% for the year; Desktop (including Windows NT), 63% for the quarter and 52% for the year. Sales specifically to NT platforms increased 200% year-to-year. Proprietary systems revenue declined 20% for the quarter and 14% for the year.

OTHER FINANCIAL DETAILS. Headcount grew 27% year over year, down somewhat from previous years. The slower rate of growth helped Oracle get expenses under better control, and the company is well positioned for fiscal 1998. Cash at the end of the quarter was $1.2 billion. Days Sales Outstanding (DSO) in Q4 was 71 days, versus 73 days in Q3 and 67 days in the year-ago quarter.

NAVIO MERGER WITH NCI. Oracle previously announced they would take a charge in Q1 of fiscal 1998 of approximately $60 million, or $0.06 per share, for in-process R&D in connection with this merger. The merger is not yet complete, but that remains management's best estimate.

REORGANIZATION. Oracle has also completed a major business reorganization. For example, Oracle has five worldwide Verticals offerings, all reporting to Robert Shaw. Product specialists and sales representatives are coordinated. Operations are working as a team. Expenses are being managed well. Oracle has implemented an organization specifically aimed at selling to customers with $500 million or less in annual sales.

NEW VERTICALS ADDITION. Oracle will announce on June 18 a new offering in its Energy verticals. Oracle has a good market share in offerings to the upstream oil & gas business. But neither Oracle nor anyone else has had a downstream offering. Oracle has now acquired the downstream system of British Petroleum. That system is built on Oracle and is Year 2000 compliant. This new offering will instantly put Oracle ahead of SAP by a good six months in this market.

ADDITIONAL COMMENTARY ON VERTICALS. CPG Verticals is now up to approximately 40 clients. The Financial Services Vertical is going well -- Oracle's position is perhaps 8 to 10 times what it was two to three years ago. Telecom had an excellent year, as did Industrials. Energy now has the downstream as well as the upstream offering.

EUROPE. A turnaround is underway in Europe. With Oracle Applications being localized for each European market and available in 10.6 and 10.7 by later this summer, that should help sales greatly there. Nearly all of the European team of directors is in place, with the exception of Germany.

MICROSOFT SQL SERVER. In response to a question, management "conjectured" that Microsoft's SQL Server product is ready to take on the enterprise. Also, selling to enterprises requires resources and selling strategies that are different from what Microsoft is experienced with.

SEDONA. Sedona was never positioned to be the development key for Oracle8, although they did get swept up together in publicity. Oracle Developer is. Sedona does not yet have Java support, and so management decided not to release it yet.

FORWARD LOOKING COMMENTS. All in all, management is pleased with Oracle's performance in the fourth quarter. Looking ahead, the fiscal first quarter is always a seasonally slow one. Still, management believes that Oracle is well-positioned for fiscal 1998, with a tremendous product cycle, led by Oracle8. Oracle8 will be unveiled in New York on June 24. There will be no "quota clubs" for the sales force in the Americas and Asia in Q1. Product flow is excellent. Oracle made some improvement in margins in fiscal 1997 and hopes to continue that in fiscal 1998.

TAX RATE. The company's tax rate was 36% for the full year, versus 34.4% for FY96. Oracle projects that the tax rate for FY98 will be approximately 35%.

CURRENCY IMPACT. Currency impact for the year was approximately 3 percentage points negatively for fiscal 1997. Management's expectation is that the impact will be 2 to 3 points negative for fiscal '98 -- possibly closer to 4 points for Q1.

SETTING THE AGENDA. Oracle is the undisputed leader in the database business, as the competition has stumbled. Oracle has also completed a transition into being a real leader for the enterprise, with a range of capabilities that others cannot compete with. Oracle is setting the strategic agenda in the marketplace -- with Oracle8, Applications 10.7, Web Server, the NC Architecture, thin clients -- and setting the direction for the next five years.

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