ORACLE CORP /DE/ - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 28, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 0-14376

Oracle Corporation

(Exact name of registrant as specified in its charter)


Delaware		94-2871189
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification no.)

500 Oracle Parkway

Redwood City, California 94065

(Address of principal executive offices, including zip code)

(650) 506-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO o

The number of shares of registrant’s common stock outstanding as of March 21, 2005: 5,141,381,025

ORACLE CORPORATION

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of February 28, 2005 and May 31, 2004		1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 28, 2005 and February 29, 2004		2
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 28, 2005 and February 29, 2004		3
	Notes to Condensed Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		63
Item 4.	Controls and Procedures		64
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		65
Item 6.	Exhibits		66
	Signatures		67
EXHIBIT 31.01
EXHIBIT 31.02
EXHIBIT 32.01

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of February 28, 2005 and May 31, 2004

(Unaudited)


				February 28,			May 31,
(in millions, except per share data)				2005			2004

ASSETS
Current assets:
	Cash and cash equivalents			$	7,221		$	4,138
	Marketable securities				1,911			4,449
	Trade receivables, net of allowances of $290 and $364				1,856			2,012
	Other receivables				244			322
	Deferred tax assets				344			301
	Prepaid expenses and other current assets				345			114

		Total current assets			11,921			11,336

Non-current assets:
	Property, net				1,471			1,068
	Intangible assets				3,344			39
	Goodwill				6,600			41
	Other assets				431			279

		Total non-current assets			11,846			1,427

			Total assets	$	23,767		$	12,763


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Short-term borrowings and current portion of long-term debt			$	7,209		$	9
	Accounts payable				307			191
	Income taxes payable				789			929
	Accrued compensation and related benefits				511			556
	Accrued restructuring				242			—
	Deferred revenues				1,935			1,497
	Other current liabilities				1,244			1,090

		Total current liabilities			12,237			4,272

Non-current liabilities:
	Notes payable and long-term debt, net of current portion				159			163
	Deferred tax liabilities				920			59
	Accrued restructuring				107			—
	Deferred revenues				101			35
	Other long-term liabilities				373			239

		Total non-current liabilities			1,660			496

Commitments and contingencies
Stockholders’ equity:
	Preferred stock, $0.01 par value— authorized: 1.0 shares; outstanding: none				—			—
	Common stock, $0.01 par value and additional paid in capital— authorized: 11,000 shares; outstanding: 5,136 shares at February 28, 2005 and 5,171 shares at May 31, 2004				6,372			5,456
	Retained earnings				3,245			2,383
	Deferred stock-based compensation				(69	)		—
	Accumulated other comprehensive income				322			156

		Total stockholders’ equity			9,870			7,995

			Total liabilities and stockholders’ equity	$	23,767		$	12,763

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended February 28, 2005 and February 29, 2004

(Unaudited)



				Three Months Ended						Nine Months Ended

				February 28,			February 29,			February 28,			February 29,
(in millions, except per share data)				2005			2004			2005			2004

Revenues:
	New software licenses			$	947		$	847		$	2,481		$	2,227
	Software license updates and product support				1,389			1,176			3,816			3,325

		Software revenues			2,336			2,023			6,297			5,552
	Services				614			486			1,624			1,528

			Total revenues		2,950			2,509			7,921			7,080

Operating expenses:
	Sales and marketing				666			525			1,701			1,503
	Software license updates and product support				160			143			437			407
	Cost of services				552			439			1,420			1,337
	Research and development				408			322			1,031			934
	General and administrative				145			130			400			370
	Amortization of intangible assets				81			8			97			29
	Acquisition related				51			15			103			43
	Restructuring				107			—			107			—
	Stock-based compensation(1)				10			—			10			—

			Total operating expenses		2,180			1,582			5,306			4,623

Operating income					770			927			2,615			2,457
Interest expense					(58	)		(4	)		(69	)		(18	)
Non-operating income, net					59			24			117			87

Income before provision for income taxes					771			947			2,663			2,526
Provision for income taxes					231			312			799			835

Net income				$	540		$	635		$	1,864		$	1,691

Earnings per share:
	Basic			$	0.11		$	0.12		$	0.36		$	0.32
	Diluted			$	0.10		$	0.12		$	0.36		$	0.32
Weighted average common shares outstanding:
	Basic				5,122			5,218			5,133			5,225
	Diluted				5,230			5,337			5,229			5,340

(1) Components of stock-based compensation:
Sales and marketing				$	2		$	—		$	2		$	—
Software license updates and product support					1			—			1			—
Cost of services					3			—			3			—
Research and development					3			—			3			—
General and administrative					1			—			1			—

Total stock-based compensation				$	10		$	—		$	10		$	—

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended February 28, 2005 and February 29, 2004

(Unaudited)



					Nine Months Ended

					February 28,			February 29,
(in millions)					2005			2004

Cash Flows From Operating Activities:
	Net income				$	1,864		$	1,691
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation				142			150
		Amortization of intangible assets				97			29
		Net investment gains related to equity securities				(1	)		(30	)
		Deferred income taxes				(117	)		45
		Minority interests in income				27			23
		Stock-based compensation				10			—
		Non-cash restructuring				33			—
		Non-cash acquisition related				34			—
		Changes in operating assets and liabilities, net of effects from PeopleSoft acquisition:
			Decrease in trade receivables			824			432
			Decrease in prepaid expenses and other assets			196			82
			Decrease in accounts payable and other liabilities			(455	)		(109	)
			Decrease in income taxes payable			(121	)		(76	)
			Increase (decrease) in deferred revenues			24			(60	)

				Net cash provided by operating activities		2,557			2,177

Cash Flows From Investing Activities:
		Purchases of marketable securities				(6,545	)		(7,578	)
		Proceeds from maturities and sale of marketable securities

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