ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Three Months Ended

% Increase

February 28, 2013

% of Revenues

February 29, 2012

% of Revenues

% Increase (Decrease) in US $

(Decrease)
in Constant Currency (1)

REVENUES

New software licenses and cloud software subscriptions

$

2,332

26

%

$

2,374

26

%

(2

%)

0

%

Software license updates and product support

4,340

48

%

4,051

45

%

7

%

8

%

Software Revenues

6,672

74

%

6,425

71

%

4

%

5

%

Hardware systems products

671

8

%

869

10

%

(23

%)

(22

%)

Hardware systems support

570

6

%

604

6

%

(6

%)

(5

%)

Hardware Systems Revenues

1,241

14

%

1,473

16

%

(16

%)

(15

%)

Services Revenues

1,045

12

%

1,141

13

%

(8

%)

(7

%)

Total Revenues

8,958

100

%

9,039

100

%

(1

%)

0

%

OPERATING EXPENSES

Sales and marketing

1,802

20

%

1,700

19

%

6

%

7

%

Software license updates and product support

306

3

%

305

3

%

1

%

2

%

Hardware systems products

337

4

%

424

5

%

(21

%)

(20

%)

Hardware systems support

219

2

%

257

3

%

(15

%)

(14

%)

Services

854

10

%

922

10

%

(7

%)

(6

%)

Research and development

1,186

13

%

1,145

13

%

4

%

4

%

General and administrative

260

3

%

261

3

%

0

%

1

%

Amortization of intangible assets

586

7

%

606

7

%

(3

%)

(3

%)

Acquisition related and other

32

0

%

38

0

%

(16

%)

(17

%)

Restructuring

42

1

%

64

0

%

(35

%)

(36

%)

Total Operating Expenses

5,624

63

%

5,722

63

%

(2

%)

(1

%)

OPERATING INCOME

3,334

37

%

3,317

37

%

1

%

2

%

Interest expense

(205

)

(2

%)

(190

)

(2

%)

8

%

8

%

Non-operating (expense) income, net

(39

)

(1

%)

21

0

%

284

%

298

%

INCOME BEFORE PROVISION FOR INCOME TAXES

3,090

34

%

3,148

35

%

(2

%)

0

%

Provision for income taxes

586

6

%

650

7

%

(10

%)

(8

%)

NET INCOME

$

2,504

28

%

$

2,498

28

%

0

%

2

%

EARNINGS PER SHARE:

Basic

$

0.53

$

0.50

Diluted

$

0.52

$

0.49

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,735

5,007

Diluted

4,812

5,080

(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 rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended February 28, 2013 compared with the corresponding prior year period decreased our revenues by 1 percentage point, operating expenses by 1 percentage point and operating income by 1 percentage point.

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

($ in millions, except per share data)

Three Months Ended

% Increase (Decrease) in US $

% Increase (Decrease) in Constant Currency (2)

February 28, 2013 GAAP

Adj.

February 28, 2013 Non-GAAP

February 29, 2012 GAAP

Adj.

February 29, 2012 Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

TOTAL REVENUES (3) (4) (5)

$

8,958

$

12

$

8,970

$

9,039

$

23

$

9,062

(1

%)

(1

%)

0

%

0

%

TOTAL SOFTWARE REVENUES (3) (4)

$

6,672

$

10

$

6,682

$

6,425

$

17

$

6,442

4

%

4

%

5

%

5

%

New software licenses and cloud software subscriptions (3)

2,332

6

2,338

2,374

-

2,374

(2

%)

(2

%)

0

%

0

%

Software license updates and product support (4)

4,340

4

4,344

4,051

17

4,068

7

%

7

%

8

%

8

%

TOTAL HARDWARE SYSTEMS REVENUES (5)

$

1,241

$

2

$

1,243

$

1,473

$

6

$

1,479

(16

%)

(16

%)

(15

%)

(15

%)

Hardware systems products

671

-

671

869

-

869

(23

%)

(23

%)

(22

%)

(22

%)

Hardware systems support (5)

570

2

572

604

6

610

(6

%)

(6

%)

(5

%)

(5

%)

TOTAL OPERATING EXPENSES

$

5,624

$

(832

)

$

4,792

$

5,722

$

(865

)

$

4,857

(2

%)

(1

%)

(1

%)

0

%

Stock-based compensation (6)

172

(172

)

-

157

(157

)

-

9

%

*

9

%

*

Amortization of intangible assets (7)

586

(586

)

-

606

(606

)

-

(3

%)

*

(3

%)

*

Acquisition related and other

32

(32

)

-

38

(38

)

-

(16

%)

*

(17

%)

*

Restructuring

42

(42

)

-

64

(64

)

-

(35

%)

*

(36

%)

*

OPERATING INCOME

$

3,334

$

844

$

4,178

$

3,317

$

888

$

4,205

1

%

(1

%)

2

%

0

%

OPERATING MARGIN %

37

%

47

%

37

%

46

%

52 bp.

17 bp.

65 bp.

17 bp.

INCOME TAX EFFECTS (8)

$

586

$

240

$

826

$

650

$

258

$

908

(10

%)

(9

%)

(8

%)

(8

%)

NET INCOME

$

2,504

$

604

$

3,108

$

2,498

$

630

$

3,128

0

%

(1

%)

2

%

1

%

DILUTED EARNINGS PER SHARE

$

0.52

$

0.65

$

0.49

$

0.62

6

%

5

%

8

%

6

%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

4,812

-

4,812

5,080

-

5,080

(5

%)

(5

%)

(5

%)

(5

%)

(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 rates in effect on May 31, 2012, 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, 2013, approximately $7 million and $6 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

(4)

As of February 28, 2013, approximately $3 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

(5)

As of February 28, 2013, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2013 and fiscal 2014 due to business combination accounting rules.

(6)

Stock-based compensation was included in the following GAAP operating expense categories:

Three Months Ended

Three Months Ended

February 28, 2013

February 29, 2012

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

Sales and marketing

$

32

$

(32

)

$

-

$

30

$

(30

)

$

-

Software license updates and product support

5

(5

)

-

5

(5

)

-

Hardware systems products

1

(1

)

-

-

-

-

Hardware systems support

1

(1

)

-

1

(1

)

-

Services

7

(7

)

-

6

(6

)

-

Research and development

86

(86

)

-

74

(74

)

-

General and administrative

40

(40

)

-

41

(41

)

-

Subtotal

172

(172

)

-

157

(157

)

-

Acquisition related and other

8

(8

)

-

18

(18

)

-

Total stock-based compensation

$

180

$

(180

)

$

-

$

175

$

(175

)

$

-

(7)

Estimated future annual amortization expense related to intangible assets as of February 28, 2013 was as follows:

Remainder of Fiscal 2013

$

582

Fiscal 2014

2,043

Fiscal 2015

1,582

Fiscal 2016

1,020

Fiscal 2017

450

Fiscal 2018

324

Thereafter

661

Total intangible assets, net

$

6,662

(8)

Income tax effects were calculated reflecting an effective GAAP tax rate of 19.0% and 20.7% in the third quarter of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 21.0% and 22.5% in the third quarter of fiscal 2013 and 2012, respectively. The difference between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2013 was primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets, and the disproportionate rate impact of discrete items for the quarter. The difference between our GAAP and non-GAAP tax rates in the third quarter of fiscal 2012 was primarily due to income tax effects related to acquired tax exposures, the differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and the disproportionate rate impact of discrete items for the quarter.

*

Not meaningful

ORACLE CORPORATION

Q3 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

Nine Months Ended

% Increase

February 28, 2013

% of Revenues

February 29, 2012

% of Revenues

% Increase (Decrease)in US $

(Decrease) in Constant Currency (1)

REVENUES

New software licenses and cloud software subscriptions

$

6,295

24

%

$

5,921

23

%

6

%

9

%

Software license updates and product support

12,740

49

%

12,058

46

%

6

%

8

%

Software Revenues

19,035

73

%

17,979

69

%

6

%

8

%

Hardware systems products

2,185

8

%

2,851

11

%

(23

%)

(22

%)

Hardware systems support

1,730

7

%

1,874

7

%

(8

%)

(5

%)

Hardware Systems Revenues

3,915

15

%

4,725

18

%

(17

%)

(15

%)

Services Revenues

3,283

12

%

3,501

13

%

(6

%)

(3

%)

Total Revenues

26,233

100

%

26,205

100

%

0

%

2

%

OPERATING EXPENSES

Sales and marketing

5,120

19

%

5,027

19

%

2

%

4

%

Software license updates and product support

860

3

%

899

3

%

(4

%)

(2

%)

Hardware systems products

1,087

4

%

1,367

5

%

(20

%)

(19

%)

Hardware systems support

670

3

%

798

3

%

(16

%)

(14

%)

Services

2,668

10

%

2,788

11

%

(4

%)

(1

%)

Research and development

3,586

14

%

3,297

13

%

9

%

10

%

General and administrative

798

3

%

848

3

%

(6

%)

(4

%)

Amortization of intangible assets

1,789

7

%

1,790

7

%

0

%

0

%

Acquisition related and other (2)

(347

)

(1

%)

63

0

%

(652

%)

(660

%)

Restructuring

318

1

%

217

1

%

46

%

52

%

Total Operating Expenses

16,549

63

%

17,094

65

%

(3

%)

(1

%)

OPERATING INCOME

9,684

37

%

9,111

35

%

6

%

10

%

Interest expense

(588

)

(2

%)

(574

)

(2

%)

2

%

3

%

Non-operating (expense) income, net

(24

)

0

%

42

0

%

158

%

166

%

INCOME BEFORE PROVISION FOR INCOME TAXES

9,072

35

%

8,579

33

%

6

%

9

%

Provision for income taxes

1,953

8

%

2,050

8

%

(5

%)

(1

%)

NET INCOME

$

7,119

27

%

$

6,529

25

%

9

%

13

%

EARNINGS PER SHARE:

Basic

$

1.48

$

1.30

Diluted

$

1.46

$

1.28

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

4,798

5,037

Diluted

4,873

5,118

(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 rates in effect on May 31, 2012, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the nine months ended February 28, 2013 compared with the corresponding prior year period decreased our revenues by 2 percentage points, operating expenses by 2 percentage points and operating income by 4 percentage points.

(2)

Acquisition related and other expenses for the nine months ended February 28, 2013 included a benefit of $306 million related to certain litigation and a net benefit of $118 million due to an acquisition related item.

ORACLE CORPORATION

Q3 FISCAL 2013 YEAR TO DATE FINANCIAL RESULTS

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

($ in millions, except per share data)

Nine Months Ended

% Increase (Decrease) in US $

% Increase (Decrease) in Constant Currency (2)

February 28, 2013 GAAP

Adj.

February 28, 2013 Non-GAAP

February 29, 2012 GAAP

Adj.

February 29, 2012 Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

TOTAL REVENUES (3) (4) (5)

$

26,233

$

59

$

26,292

$

26,205

$

66

$

26,271

0

%

0

%

2

%

2

%

TOTAL SOFTWARE REVENUES (3) (4)

$

19,035

$

49

$

19,084

$

17,979

$

40

$

18,019

6

%

6

%

8

%

8

%

New software licenses and cloud software subscriptions (3)

6,295

37

6,332

5,921

-

5,921

6

%

7

%

9

%

9

%

Software license updates and product support (4)

12,740

12

12,752

12,058

40

12,098

6

%

5

%

8

%

8

%

TOTAL HARDWARE SYSTEMS REVENUES (5)

$

3,915

$

10

$

3,925

$

4,725

$

26

$

4,751

(17

%)

(17

%)

(15

%)

(16

%)

Hardware systems products

2,185

-

2,185

2,851

-

2,851

(23

%)

(23

%)

(22

%)

(22

%)

Hardware systems support (5)

1,730

10

1,740

1,874

26

1,900

(8

%)

(8

%)

(5

%)

(6

%)

TOTAL OPERATING EXPENSES

$

16,549

$

(2,296

)

$

14,253

$

17,094

$

(2,523

)

$

14,571

(3

%)

(2

%)

(1

%)

0

%

Stock-based compensation (6)

536

(536

)

-

453

(453

)

-

18

%

*

18

%

*

Amortization of intangible assets (7)

1,789

(1,789

)

-

1,790

(1,790

)

-

0

%

*

0

%

*

Acquisition related and other

(347

)

347

-

63

(63

)

-

(652

%)

*

(660

%)

*

Restructuring

318

(318

)

-

217

(217

)

-

46

%

*

52

%

*

OPERATING INCOME

$

9,684

$

2,355

$

12,039

$

9,111

$

2,589

$

11,700

6

%

3

%

10

%

5

%

OPERATING MARGIN %

37

%

46

%

35

%

45

%

215 bp.

125 bp.

238 bp.

127 bp.

INCOME TAX EFFECTS (8)

$

1,953

$

630

$

2,583

$

2,050

$

740

$

2,790

(5

%)

(7

%)

(1

%)

(5

%)

NET INCOME

$

7,119

$

1,725

$

8,844

$

6,529

$

1,849

$

8,378

9

%

6

%

13

%

8

%

DILUTED EARNINGS PER SHARE

$

1.46

$

1.81

$

1.28

$

1.64

15

%

11

%

18

%

14

%

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

4,873

-

4,873

5,118

-

5,118

(5

%)

(5

%)

(5

%)

(5

%)

(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 rates in effect on May 31, 2012, 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, 2013, approximately $7 million and $6 million in estimated revenues related to assumed cloud software subscriptions contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

(4)

As of February 28, 2013, approximately $3 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for the remainder of fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

(5)

As of February 28, 2013, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for each of the remainder of fiscal 2013 and fiscal 2014 due to business combination accounting rules.

(6)

Stock-based compensation was included in the following GAAP operating expense categories:

Nine Months Ended

Nine Months Ended

February 28, 2013

February 29, 2012

GAAP

Adj.

Non-GAAP

GAAP

Adj.

Non-GAAP

Sales and marketing

$

112

$

(112

)

$

-

$

86

$

(86

)

$

-

Software license updates and product support

15

(15

)

-

13

(13

)

-

Hardware systems products

2

(2

)

-

1

(1

)

-

Hardware systems support

3

(3

)

-

4

(4

)

-

Services

24

(24

)

-

16

(16

)

-

Research and development

258

(258

)

-

213

(213

)

-

General and administrative

122

(122

)

-

120

(120

)

-

Subtotal

536

(536

)

-

453

(453

)

-

Acquisition related and other

30

(30

)

-

21

(21

)

-

Total stock-based compensation

$

566

$

(566

)

$

-

$

474

$

(474

)

$

-

(7)

Estimated future annual amortization expense related to intangible assets as of February 28, 2013 was as follows:

Remainder of Fiscal 2013

$

582

Fiscal 2014

2,043

Fiscal 2015

1,582

Fiscal 2016

1,020

Fiscal 2017

450

Fiscal 2018

324

Thereafter

661

Total intangible assets, net

$

6,662

(8)

Income tax effects were calculated reflecting an effective GAAP tax rate of 21.5% and 23.9% in the first nine months of fiscal 2013 and 2012, respectively, and an effective non-GAAP tax rate of 22.6% and 25.0% in the first nine months of fiscal 2013 and 2012, respectively. The differences between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2013 were primarily due to the net tax effects of acquisition related items, including the tax effect of amortization of intangible assets. The difference between our GAAP and non-GAAP tax rates in the first nine months of fiscal 2012 was primarily due to income tax effects related to acquired tax exposures, the differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and the disproportionate rate impact of discrete items for the first nine months of fiscal 2012.

*

Not meaningful

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

February 28,

May 31,

2013

2012

ASSETS

Current Assets:

Cash and cash equivalents

$

16,101

$

14,955

Marketable securities

17,306

15,721

Trade receivables, net

4,169

6,377

Inventories

211

158

Deferred tax assets

829

877

Prepaid expenses and other current assets

2,070

1,935

Total Current Assets

40,686

40,023

Non-Current Assets:

Property, plant and equipment, net

3,034

3,021

Intangible assets, net

6,662

7,899

Goodwill

26,102

25,119

Deferred tax assets

651

595

Other assets

2,315

1,670

Total Non-Current Assets

38,764

38,304

TOTAL ASSETS

$

79,450

$

78,327

LIABILITIES AND EQUITY

Current Liabilities:

Notes payable, current and other current borrowings

$

1,250

$

2,950

Accounts payable

361

438

Accrued compensation and related benefits

1,557

2,002

Deferred revenues

6,278

7,035

Other current liabilities

2,470

2,963

Total Current Liabilities

11,916

15,388

Non-Current Liabilities:

Notes payable and other non-current borrowings

18,502

13,524

Income taxes payable

3,775

3,759

Other non-current liabilities

1,467

1,569

Total Non-Current Liabilities

23,744

18,852

Equity

43,790

44,087

TOTAL LIABILITIES AND EQUITY

$

79,450

$

78,327

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Nine Months Ended

February 28, 2013

February 29, 2012

Cash Flows From Operating Activities:

Net income

$

7,119

$

6,529

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

400

350

Amortization of intangible assets

1,789

1,790

Deferred income taxes

108

(200

)

Stock-based compensation

566

474

Tax benefits on the exercise of stock options and vesting of restricted stock-based awards

372

123

Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards

(220

)

(71

)

Other, net

120

67

Changes in operating assets and liabilities, net of effects from acquisitions:

Decrease in trade receivables, net

2,269

2,028

(Increase) decrease in inventories

(48

)

139

(Increase) decrease in prepaid expenses and other assets

(241

)

87

Decrease in accounts payable and other liabilities

(912

)

(1,353

)

(Decrease) increase in income taxes payable

(853

)

259

Decrease in deferred revenues

(809

)

(536

)

Net cash provided by operating activities

9,660

9,686

Cash Flows From Investing Activities:

Purchases of marketable securities and other investments

(24,027

)

(29,745

)

Proceeds from maturities and sales of marketable securities and other investments

22,359

26,472

Acquisitions, net of cash acquired

(1,592

)

(2,833

)

Capital expenditures

(467

)

(431

)

Net cash used for investing activities

(3,727

)

(6,537

)

Cash Flows From Financing Activities:

Payments for repurchases of common stock

(8,204

)

(3,457

)

Proceeds from issuances of common stock

1,300

513

Payments of dividends to stockholders

(1,433

)

(909

)

Proceeds from borrowings, net of issuance costs

4,974

-

Repayments of borrowings

(1,700

)

(1,405

)

Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards

220

71

Distributions to noncontrolling interests

(31

)

(163

)

Net cash used for financing activities

(4,874

)

(5,350

)

Effect of exchange rate changes on cash and cash equivalents

87

(181

)

Net increase (decrease) in cash and cash equivalents

1,146

(2,382

)

Cash and cash equivalents at beginning of period

14,955

16,163

Cash and cash equivalents at end of period

$

16,101

$

13,781

ORACLE CORPORATION

Q3 FISCAL 2013 FINANCIAL RESULTS

FREE CASH FLOW - TRAILING 4-QUARTERS (1)

($ in millions)

Fiscal 2012

Fiscal 2013

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4