ORACLE CORPORATION
Redwood City, CA
(415) 506-7000

ALEXANDRIA, VA, September 12, 1996/FOOLWIRE/ --- Oracle Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ORCL)") else Response.Write("(NASDAQ: ORCL)") end if %>, the world's second largest software company, today announced record first quarter results for the quarter ended August 31, 1996. The company provides information management databases, tools, consulting, education and support services. For Q1, revenues increased 36 percent to $1.052 billion from $772 million in the same period last year. Net income for the period increased 110 percent to $113 million, or $0.17 per share, compared to net income of $54 million, or $0.08 per share, in the first quarter of fiscal 1996, which included the $34 million after-tax charge for the purchase of in-process research and development from Information Resources, Inc. in the same period last year.

First quarter license sales grew by 27 percent year-to-year (26 percent when combined with other revenues). Database license revenue led overall license growth at 41%, confirming the continued strong demand for Oracle(R) Universal Server(R), Oracle's core technology. Oracle Services (Support, Consulting and Education) grew 45%.

Geographically, Oracle reported solid performance worldwide, despite a three percentage point negative currency translation during the first quarter, with Asia/Pacific heavily impacted by a weaker yen. Oracle Americas reported the strongest revenue growth geographically at 43% versus the same period last year.

A PRETTY TYPICAL Q1 FOR ORACLE

Jeff Henley, executive vice-president and chief financial officer, indicated that Oracle typically starts slowly during the first quarter, this year more so because of reorganization, which will be discussed later. Headcount for the quarter grew about 36% vs. 37% a year ago, demonstrating the company's continued personnel ramp-up. Pre-tax margins were 16.7% vs. 17.2%. The company's tax rate did go up to a 36% rate vs. a 34% rate used in the same period last year. EPS for this quarter of $0.17 is comparable to a figure of $0.13, which is the number for the same period a year ago after the one time charge for the acquisition of the Express business is subtracted. Thus, EPS grew at a 31% rate.

On the balance sheet, cash was above $1 billion for the first time. Accounts/Receivable Days Sales Outstanding (A/R DSO) was 77 days vs. 71 a year ago, a blip which was a little bit higher than expected. This means that it's taking Oracle's customers six days longer to settle their accounts than it did last year.

Server revenue growth was strong for Q1, up 41%. Tools were down 6%. The only negative surprise was Applications, which only grew 4%, which is significantly slower growth than in previous years. The company drove the pipeline for closure at the end of the year, most simply because it is often hard to get business done, especially in the European market, during the late summer months. Fairly early in the quarter, it became apparent that the company would have a slow quarter because the pipeline was somewhat depleted. The company does not believe that this is a trend, and looking at its Q2 forecast, the pipeline is refilled, and it is expecting a very good Q2. The company foresees no change in the market which would indicate that it is going to have anything but a great Q2 and year.

REORGANIZATION

The major change was to create vertical organizations around products for specific industries. The major industry organizations are oil & gas, consumer packaged goods, telecom and banking. In some sectors, government is also included. This has gone very well. Good pipelines are building in consumer packaged goods and oil and gas segments and the response from these market segments has been positive. These changes have long term effects which may not be seen in recognized revenue in the next quarter, but they are building the business over the long run.

The company plans to divide its focus between two contract categories. In the under $400 million (in the U.S., under $500 million) market, the company has simply segmented the salesforce. Oracle still sells directly to these markets, and will continue to do so for a long time to come, but it feels that the direct salesforce only reaches a small part of the market. The reorganization allows Oracle to focus totally on a portion of the market and build the resources behind it, then recruit partners or dealers and set up local service organizations to deal with those customers. The company has taken the first step, and it will take a year to a year and a half to build up a dealer network. Over a two year period, the company will be moving the direct salesforce into the above $500 million to place more resources where the money is because there are not enough resources currently serving the big clients. It is hopefully a win-win situation -- decreased costs and increased revenues with broader indirect sales at the low-end and greater resources selling directly to the high end.

Indirect sales as a proportion of the business are currently 30%. If a few international markets are excluded, this number drops to 20%. The US market is about 80/20 at this point, Europe 70/30. The company looks to improve this distribution by about 10% over the next couple of years. Ideally, these "dealers" will represent a way to distribute products to the low end of the market as though they were a direct salesforce, even though they are on somebody of elses' payroll. The desired effect of this move is to make future indirect sales more "direct" than they are now.

SALES BY PRODUCT AND PRODUCT LINE

UNIX sales by grew by 24%, while desktop grew 59%. The numbers need a little explanation because of the advent of Windows NT. The UNIX number is made up of 35% UNIX server growth, and a negative tools growth, which has been implied in the numbers of sometime. Windows and Windows NT growth on server was about 118%. This segment is growing very fast, but remains only 15-20% of the UNIX figures.

The company has alot going on in the product area. The company released Oracle Universal Server with Oracle7 Release 7.3 and a beta version of Oracle8, and has received very positive reviews for its application development tool, Developer/2000, and its generation and modeling tool, Designer/2000. The product cycle continues to be very strong, and the company is in high gear for filling the pipeline. The company expects to do better for the remainder of the year than in Q1, which would be similar to last year.

EUROPE

The European management changes have been fairly public. Pier Carlo Falloti was named head of European operation starting September first and Bob Gordon is now head of Western Europe, where Oracle does about 75 to 80% of the European business. The general salesforce reorganization was effected in Europe as well. Oracle has created four vertical organization structures and must sign up the leadership for these structures. They are currently about half the way through it. In addition, the company has created a market in Europe for accounts under $400 million. Chief operating officer Raymond Lane doesn't believe that the reorganization had much effect on the core businesses in Europe, such as the database growth. For instance in the UK, Oracle had a great quarter all around.

COMPETITIVE LANDSCAPE

The company feels good about the competitive landscape, especially the server area, where it continues to grow market share versus the company's core competitors. The company is seeing a lot of interest, especially among Sybase customers, for conversion. Oracle along with Informix Corp. are taking advantage of this. A lot of the conversion interest is coming from New York City. The application area continues strong, and the company takes all the blame for allowing the pipeline to become diminished. Nevertheless, the company is optimistic about Q2. The management feels that the Express business is an "uncut diamond" at the moment, with alot of business and interest out there. There is also a lot of interest in Internet products such as Interoffice.

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