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                                 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 quarterly period ended August 31, 2001

                                      OR

[_] 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  (I.R.S. Employer
              incorporation or organization)  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 [_]

The number of shares of registrant's common stock outstanding as of September
28, 2001 was 5,561,668,633.


--------------------------------------------------------------------------------

--------------------------------------------------------------------------------



                              ORACLE CORPORATION

                          FORM 10-Q QUARTERLY REPORT

                               -----------------

                               TABLE OF CONTENTS



                                                                                               Page
                                                                                               ----
                                                                                         

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at August 31, 2001 and May 31, 2001............   3

         Condensed Consolidated Statements of Operations for the three months ended August 31,
         2001 and August 31, 2000.............................................................   4

         Condensed Consolidated Statements of Cash Flows for the three months ended August 31,
         2001 and August 31, 2000.............................................................   5

         Notes to Condensed Consolidated Financial Statements.................................   6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations  11

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........................  20

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings....................................................................  23

Item 6.  Exhibits and Reports on Form 8-K.....................................................  24

         Signatures...........................................................................  25


                                      2



PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



                                                                              August 31,       May 31,
(in thousands, except share data)                                                2001           2001
----------------------------------------------------------------------------  -----------    -----------
                                                                              (unaudited)
                                                                                       
                                   ASSETS
Current assets:
   Cash and cash equivalents................................................. $ 3,915,579    $ 4,449,166
   Short-term cash investments...............................................   2,135,852      1,438,495
   Trade receivables, net of allowance for doubtful accounts of $399,531 and
     $403,305, respectively..................................................   1,759,789      2,432,131
   Other receivables.........................................................     203,469        281,782
   Prepaid and refundable income taxes.......................................     451,170        272,742
   Prepaid expenses and other current assets.................................     111,435         88,834
                                                                              -----------    -----------
          Total current assets...............................................   8,577,294      8,963,150
Long-term cash investments...................................................     285,544             --
Property, net................................................................   1,026,713        974,751
Long-term prepaid income taxes...............................................     396,631        376,030
Intangible and other assets..................................................     899,758        716,229
                                                                              -----------    -----------
          Total assets....................................................... $11,185,940    $11,030,160
                                                                              ===========    ===========
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable and current maturities of long-term debt.................... $     3,527    $     2,849
   Accounts payable..........................................................     236,782        270,112
   Income taxes payable......................................................   1,077,340        767,087
   Accrued compensation and related benefits.................................     494,979        734,705
   Customer advances and unearned revenues...................................   1,367,240      1,213,529
   Value added tax and sales tax payable.....................................      64,500        165,210
   Other accrued liabilities.................................................     822,352        763,127
                                                                              -----------    -----------
          Total current liabilities..........................................   4,066,720      3,916,619
Long-term debt...............................................................     300,872        300,847
Deferred income taxes........................................................     403,057        327,788
Other long-term liabilities..................................................     195,968        207,135
                                                                              -----------    -----------
          Total liabilities..................................................   4,966,617      4,752,389
                                                                              -----------    -----------
Stockholders' equity:
   Preferred stock, $0.01 par value--authorized, 1,000,000 shares;
     outstanding: none.......................................................          --             --
   Common stock, $0.01 par value and additional paid in capital--authorized,
     11,000,000,000 shares; outstanding: 5,558,917,440 shares at August 31,
     2001 and 5,592,360,823 shares at May 31, 2001...........................   4,834,899      4,820,869
   Retained earnings.........................................................   1,400,483      1,610,480
   Accumulated other comprehensive loss......................................     (16,059)      (153,578)
                                                                              -----------    -----------
          Total stockholders' equity.........................................   6,219,323      6,277,771
                                                                              -----------    -----------
          Total liabilities and stockholders' equity......................... $11,185,940    $11,030,160
                                                                              ===========    ===========


See notes to condensed consolidated financial statements

                                      3



ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)



                                                                 Three Months Ended
                                                                     August 31,
                                                               ----------------------
(in thousands, except per share data)                             2001        2000
-------------------------------------------------------------  ----------  ----------
                                                                     
Revenues:
   Licenses and other......................................... $  731,432  $  807,238
   Services...................................................  1,510,613   1,454,637
                                                               ----------  ----------
       Total revenues.........................................  2,242,045   2,261,875
                                                               ----------  ----------
Operating expenses:
   Sales and marketing........................................    535,481     572,964
   Cost of services...........................................    609,873     673,878
   Research and development...................................    253,299     251,027
   General and administrative.................................     97,614     105,965
                                                               ----------  ----------
       Total operating expenses...............................  1,496,267   1,603,834
                                                               ----------  ----------
Operating income..............................................    745,778     658,041
                                                               ----------  ----------
   Net investment gains (losses) related to equity securities.     (3,301)     15,433
   Other income, net..........................................     43,134     102,769
                                                               ----------  ----------
Income before provision for income taxes......................    785,611     776,243
   Provision for income taxes.................................    274,964     275,566
                                                               ----------  ----------
Net income.................................................... $  510,647  $  500,677
                                                               ==========  ==========
Earnings per share:
   Basic...................................................... $     0.09  $     0.09
                                                               ==========  ==========
   Diluted.................................................... $     0.09  $     0.08
                                                               ==========  ==========
Weighted average common shares outstanding:
   Basic......................................................  5,579,811   5,604,058
                                                               ==========  ==========
   Diluted....................................................  5,780,020   5,932,870
                                                               ==========  ==========


See notes to condensed consolidated financial statements

                                      4



ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)



                                                                                        Three Months Ended
                                                                                            August 31,
                                                                                     ------------------------
(in thousands)                                                                          2001         2000
-------------------------------------------------------------------------------      -----------  -----------
                                                                                            
Cash Flows From Operating Activities:
   Net income....................................................................... $   510,647  $   500,677
   Adjustments to reconcile net income to net cash provided by (used for)
     operating activities:
       Depreciation and amortization................................................      65,641       73,160
       Amortization of purchase price in excess of net tangible assets acquired.....      15,360       18,997
       Provision for doubtful accounts..............................................      30,472       41,153
       Net investment losses/(gains) related to equity securities...................       3,301      (15,433)
       Changes in assets and liabilities:
          Decrease in trade receivables.............................................     648,461      794,188
          (Increase) decrease in prepaid expenses and other current assets..........    (120,823)      88,142
          Increase in long-term prepaid income taxes................................     (20,249)      (1,122)
          Decrease in accounts payable..............................................     (33,787)     (34,038)
          Increase (decrease) in income taxes payable...............................     322,737   (2,117,814)
          Decrease in accrued compensation and related benefits.....................    (241,530)    (323,513)
          Increase in customer advances and unearned revenues.......................     149,257      137,486
          Decrease in value added tax and sales tax payable.........................    (101,333)     (81,350)
          Increase in other accrued liabilities.....................................      56,384       56,440
          Decrease in deferred income taxes.........................................      (9,772)        (744)
          Decrease in other long-term liabilities...................................     (11,198)     (10,036)
                                                                                     -----------  -----------
   Net cash provided by (used for) operating activities.............................   1,263,568     (873,807)
                                                                                     -----------  -----------
Cash Flows From Investing Activities:
       Purchases of cash investments................................................  (1,732,534)     (27,000)
       Proceeds from maturities of cash investments.................................     749,633      174,317
       Capital expenditures.........................................................    (112,547)     (73,397)
       Proceeds from sales of marketable securities.................................       9,389       36,252
       (Increase) decrease in intangible and other assets...........................     (18,526)      37,302
                                                                                     -----------  -----------
   Net cash (used for) provided by investing activities.............................  (1,104,585)     147,474
                                                                                     -----------  -----------
Cash Flows From Financing Activities:
       Payments for repurchase of common stock......................................    (753,796)  (1,995,423)
       Proceeds from issuance of common stock.......................................      39,575      130,122
       Proceeds under notes payable and long-term debt, net.........................         653        2,924
                                                                                     -----------  -----------
   Net cash used for financing activities...........................................    (713,568)  (1,862,377)
   Effect of exchange rate changes on cash and cash equivalents.....................      20,998       (3,399)
                                                                                     -----------  -----------
   Net decrease in cash and cash equivalents........................................    (533,587)  (2,592,109)
   Cash and cash equivalents at beginning of period.................................   4,449,166    7,429,206
                                                                                     -----------  -----------
   Cash and cash equivalents at end of period....................................... $ 3,915,579  $ 4,837,097
                                                                                     ===========  ===========


See notes to condensed consolidated financial statements

                                      5



ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2001
(unaudited)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to make the information
presented not misleading. These unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 2001.

The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments)
which are, in the opinion of management, necessary to state fairly the results
for the interim periods presented. The results of operations for the interim
periods presented are not necessarily indicative of the operating results to be
expected for any subsequent interim period or for the full fiscal year ending
May 31, 2002.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

2. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income for the period by
the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the treasury stock method by
dividing net income by the weighted average number of common shares plus the
dilutive effect of outstanding stock options and shares issuable under the
employee stock purchase plan and a forward contract to sell 36.0 million shares
of the Company's Common Stock. Approximately 68.8 million outstanding stock
options were excluded from the calculation of diluted earnings per share for
the three months ended August 31, 2001, because they were anti-dilutive.
However, these options could be dilutive in the future.

The following table sets forth the computation of basic and diluted earnings
per share for the periods indicated:



                                                              Three Months Ended
                                                                  August 31,
                                                             ---------------------
(in thousands, except per share data)                           2001       2000
------------------------------------------------------------ ---------- ----------
                                                                  
Net income.................................................. $  510,647 $  500,677
                                                             ========== ==========

Weighted average common shares outstanding..................  5,579,811  5,604,058
Dilutive effect of employee stock plans and forward contract    200,209    328,812
                                                             ---------- ----------
Diluted weighted average common shares outstanding..........  5,780,020  5,932,870
                                                             ========== ==========

Basic earnings per share.................................... $     0.09 $     0.09
                                                             ========== ==========
Diluted earnings per share.................................. $     0.09 $     0.08
                                                             ========== ==========


                                      6



ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

August 31, 2001
(unaudited)


3. COMPREHENSIVE INCOME

Comprehensive income includes foreign currency translation gains and losses and
unrealized gains and losses on equity securities that are reflected in
stockholders' equity instead of net income.

The following table sets forth the calculation of comprehensive income for the
periods indicated:



                                                   Three Months Ended
                                                       August 31,
                                                   -----------------
(in thousands)                                       2001     2000
-------------------------------------------------- -------- --------
                                                      
Net income........................................ $510,647 $500,677
Net unrealized gains (losses) on equity securities  115,822   (3,332)
Foreign currency translation gains (losses).......   21,697   (2,918)
                                                   -------- --------
Total comprehensive income........................ $648,166 $494,427
                                                   ======== ========


The net unrealized gains on equity securities for the three months ended August
31, 2001 primarily reflect the marked to market gain for the Company's
investment in Liberate Technologies. Effective February 1, 2001, the Company
began to account for this investment as available for sale securities. Please
see Footnote No. 6, Subsidiary Stock Transactions, in the Company's Form 10-K
for the fiscal year ended May 31, 2001, for further information.

4. STOCK REPURCHASE PROGRAM

Since 1992 the Company's Board of Directors has cumulatively approved the
repurchase of 1.1 billion shares plus an additional amount of $3.0 billion to
reduce the dilutive effect of shares issued under its various employee stock
plans. During the three months ended August 31, 2001, approximately 42.1
million shares of Common Stock were repurchased for an aggregate price of
approximately $753.8 million. As of August 31, 2001, the Company has
repurchased in excess of 1.1 billion shares for an aggregate price of
approximately $12.1 billion and has approximately $2.6 billion available for
future repurchases.

5. RECENT ACCOUNTING PRONOUNCEMENTS

As indicated in the Company's Form 10-K for the fiscal year ended May 31, 2001,
the Company adopted Statement of Financial Accounting Standards ("SFAS") 133,
"Accounting for Derivative Instruments and for Hedging Activities," as of June
1, 2001 whereby the Company elected to designate the changes in forward
exchange rates for the measurement of effectiveness in net investment hedges.
Upon further review, the Company believes that using the changes in spot
exchange rates better meets the Company's risk management strategies, better
reflects the economics of those strategies in the Company's financial
statements, and better manages interest rate differentials between different
countries. Accordingly, effective September 1, 2001, the Company has decided to
designate the changes in spot exchange rates for the measurement of
effectiveness in net investment hedges. As a result, the cumulative effect of
the change in accounting principles that relates to the ineffective portion of
the changes in fair value of the hedging instruments will be reported in the
Consolidated Statements of Operations. The amount will be recorded in the Other
Income line in the quarter ended November 30, 2001, and no prior quarter
restatement is deemed necessary due to the immateriality of the amount. As of
August 31, 2001, the Company only had one outstanding forward contract
designated as a net investment hedge with a notional amount of approximately
$32 million.

                                      7



ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

August 31, 2001
(unaudited)

5. RECENT ACCOUNTING PRONOUNCEMENTS (continued)


In July 2001, the Financial Accounting Standards Board ("FASB"), issued SFAS
No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 provides new guidance on the accounting for a
business combination as of the date a business combination is completed.
Specifically, it requires use of the purchase method of accounting for all
business combinations initiated after June 30, 2001, thereby eliminating use of
the pooling-of-interests method. SFAS No. 142 establishes new guidance on how
to account for goodwill and intangible assets after a business combination is
completed. Among other things, it requires that goodwill and certain other
intangible assets will no longer be amortized and will instead be tested for
impairment at least annually and written down only when impaired. This
statement will apply to existing goodwill and intangible assets, beginning with
fiscal years starting after December 15, 2001. The Company is currently
evaluating these statements but does not expect that they will have a material
impact on the Company's financial position, results of operations, or cash
flows.

6. SEGMENT REPORTING

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," established standards for reporting information about operating
segments in the Company's financial statements. Operating segments are defined
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and in assessing
performance. The Company's chief operating decision maker is the Chief
Executive Officer of the Company.

The Company is organized geographically and by line of business. While the
Chief Executive Officer of the Company evaluates results in a number of
different ways, the line of business management structure is the primary basis
for which allocation of resources and financial performance are assessed. The
accounting policies of the line of business operating segments are the same as
those described in the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 2001. The Company does not track assets by operating segments.
Consequently, it is not practical to show assets by operating segments. The
Company has five major line of business operating segments: new license,
license updates, support, education and consulting. Effective June 1, 2001, the
Company expanded its operating segments to include license updates, which
represent the Company's estimate of the portion of maintenance revenues that
relate to license updates. This estimate is based on the Company's current
pricing model, which prices license updates at 15% of net license price and
product support at 7% of net license price. While these license updates were
included in the support operating segment in the past, the Company believes
that for business and management evaluation purposes, license updates should be
viewed separately from support as they represent a subscription to future
license product versions, and their inclusion would distort the support margins
as the majority of the costs related to such updates are contained in the
research and development area.

                                      8



ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

August 31, 2001
(unaudited)

6. SEGMENT REPORTING (continued)


The following table presents a summary of operating segments:/(1)/



                                                             Three Months Ended
                                                                 August 31,
                                                            ---------------------
(in thousands)                                                 2001       2000
--------------------------------------------------------    ---------- ----------
                                                                 
New license:
   New license revenues from unaffiliated customers/(2)/... $  727,826 $  794,800
   Distribution expenses...................................    408,584    424,509
                                                            ---------- ----------
   Distribution margin/(3)/................................ $  319,242 $  370,291
License updates:
   Revenues from unaffiliated customers/(2)/...............    559,171    513,665
   Distribution expenses...................................      5,479      3,903
                                                            ---------- ----------
   Distribution margin/(3)/................................ $  553,692 $  509,762
       New license and license updates:
          Revenues from unaffiliated customers/(2)/........ $1,286,997 $1,308,465
          Distribution expenses............................    414,063    428,412
                                                            ---------- ----------
          Distribution margin/(3)/......................... $  872,934 $  880,053
Support:/(4)/
   Revenues from unaffiliated customers/(2)/............... $  354,781 $  325,325
   Distribution expenses...................................    140,835    150,674
                                                            ---------- ----------
   Distribution margin/(3)/................................ $  213,946 $  174,651
Education:
   Revenues from unaffiliated customers/(2)/............... $  102,495 $  101,294
   Distribution expenses...................................     55,351     71,265
                                                            ---------- ----------
   Distribution margin/(3)/................................ $   47,144 $   30,029
Consulting:
   Revenues from unaffiliated customers/(2)/............... $  497,772 $  526,791
   Distribution expenses...................................    366,666    398,156
                                                            ---------- ----------
   Distribution margin/(3)/................................ $  131,106 $  128,635
       Totals:
          Revenues from unaffiliated customers/(2)/........ $2,242,045 $2,261,875
          Distribution expenses............................    976,915  1,048,507
                                                            ---------- ----------
          Distribution margin/(3)/......................... $1,265,130 $1,213,368
                                                            ========== ==========

--------
/(1)/For business and management evaluation purposes, the Company from time to
   time changes the underlying structure for its operating segments. Segment
   data related to prior periods were reclassified, as required by SFAS No.
   131, to conform to the current organizational structure.
/(2)/Operating segment revenues differ from the external reporting
   classifications due to certain license products which are classified as
   services revenues for management reporting purposes. Additionally, the
   license updates revenues are classified as services revenues for external
   reporting purposes.
/(3)/The distribution margins reported reflect only the direct controllable
   expenses of each line of business and do not represent the actual margins
   for each operating segment since they do not contain an allocation for
   product

                                      9



ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

August 31, 2001
(unaudited)

6. SEGMENT REPORTING (continued)

  development and information technology, marketing and partner programs, and
  corporate and general and administrative expenses incurred in support of the
  line of business.
/(4)/As indicated above, license updates revenues were previously reported
   under support but are now separately stated.

Profit reconciliation


                                                             Three Months Ended
                                                                 August 31,
                                                           ----------------------
(in thousands)                                                2001        2000
---------------------------------------------------------- ----------  ----------
                                                                 
Total distribution margin for reportable segments......... $1,265,130  $1,213,368
Product development and information technology expenses...   (337,641)   (338,073)
Marketing and partner program expenses....................    (90,842)   (104,291)
Corporate and general and administrative expenses.........    (72,132)    (88,053)
Net investment gains (losses) related to equity securities     (3,301)     15,433
Other income, net.........................................     24,397      77,859
                                                           ----------  ----------
   Income before provision for income taxes............... $  785,611  $  776,243
                                                           ==========  ==========


7. LEGAL PROCEEDINGS

Refer to Part II, Item 1 for a description of legal proceedings.

                                      10



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Forward-Looking Statements

In addition to historical information, this Quarterly Report contains
forward-looking statements. The forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Factors That May Affect Future
Results and Market Price of Stock." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
opinions only as of the date hereof. The Company undertakes no obligation to
revise or publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in other
documents the Company files from time to time with the SEC, including the
Annual Report on Form 10-K for the fiscal year ended May 31, 2001 and the
Quarterly Reports on Form 10-Q filed by the Company in fiscal 2002.

Results of Operations

Total revenues decreased 1% in the first quarter of fiscal 2002 as compared to
the corresponding prior year period. The decrease was primarily attributable to
lower license revenues as a result of a continued weakness in the economy.
Sales and marketing and cost of services expenses continue to represent
significant portions of operating expenses. Sales and marketing as a percentage
of total revenues was 24% for the first quarter of fiscal 2002 and 25% for the
corresponding prior year period. Cost of services as a percentage of total
revenues decreased to 27% for the first quarter of fiscal 2002, compared to 30%
for the corresponding prior year period. Research and development expenses as a
percentage of total revenues remained fairly constant at 11% for the first
quarters of fiscal 2002 and fiscal 2001. General and administrative expenses as
a percentage of total revenues decreased to 4% in the first quarter of fiscal
2002 compared to 5% for the corresponding prior year period. Overall, operating
income as a percentage of total revenues increased to 33% during the first
quarter of fiscal 2002 compared to 29% for the corresponding prior year period.

Domestic revenues decreased 3% during the first quarter of fiscal 2002 as
compared to the corresponding prior year period due to weakening economic
conditions in the United States. International revenues increased 2% during the
first three months of fiscal 2002 over the corresponding prior year period.
International revenues were unfavorably affected during the first three months
of fiscal 2002 as a result of the U.S. dollar strengthening against certain
major international currencies. Excluding the effect of currency rate
fluctuations, international revenues grew 9% for the first three months of
fiscal 2002 over the corresponding prior year period. Excluding the effect of
currency rate fluctuations, total revenues grew 2% for the first three months
of fiscal 2002 over the corresponding prior year period. International revenues
represented 51% of total revenues for the first three months of fiscal 2002, as
compared to 50% of total revenues for the corresponding prior year period. The
Company expects that its international operations will continue to generate a
significant portion of total revenues, and thus, its revenues may be adversely
affected if the U.S. dollar continues to strengthen relative to international
currencies.

                                      11



Revenues



                     Three Months Ended August 31,
                     -----------------------------
(in thousands)          2001     Change    2000
-------------------- ----------  ------ ----------
                               
Licenses and other.. $  731,432    (9%) $  807,238
Services............  1,510,613     4%   1,454,637
                     ----------         ----------
   Total revenues... $2,242,045    (1%) $2,261,875
                     ==========         ==========
Percent of Revenues:
Licenses and other..        33%                36%
Services                    67%                64%
                     ----------         ----------
   Total revenues...       100%               100%
                     ==========         ==========


Licenses and Other Revenues. License revenues represent fees earned for
granting customers new licenses to use the Company's software products.
Licenses and other revenues also include documentation and other miscellaneous
revenues. Documentation revenues and other miscellaneous revenues constituted
3% of total licenses and other revenues for the first three months of fiscal
2002, as compared to 4% of total licenses and other revenues for the
corresponding prior year period. License revenues, excluding documentation and
other miscellaneous revenues, decreased 8% for the first three months of fiscal
2002 from the corresponding prior year period. Systems software license
revenues, which include server and development tools revenues, decreased 8% for
the first three months of fiscal 2002 from the corresponding prior year period.
Business applications revenues decreased 6% for the first three months of
fiscal 2002 from the corresponding prior year period. The slowdown in license
revenues in the first quarter of fiscal 2002 was primarily due to uncertainty
related to weakening economic conditions in the United States, as well as the
retrenchment of the dot-com market, that negatively impacted demand for the
Company's systems and business application products.  As a percentage of
revenues, licenses and other revenues represented 33% of total revenues for the
first three months of fiscal 2002, as compared to 36% of total revenues for the
corresponding prior year period.

Effective June 1, 2001, the Company expanded its operating segments to include
license updates which represent the Company's estimate of the portion of
maintenance revenues that relate to license updates. The Company believes that
for business and management evaluation purposes, license updates should be
viewed separately from support as they represent a subscription to future
license product versions, and their inclusion would distort the support margins
as the majority of the costs related to such updates are contained in the
research and development area. Had these license updates been reclassified out
of support revenues, license revenues including these license updates would
have decreased 1% in the first three months of fiscal 2002 over the
corresponding prior year period. License updates alone increased 9% for the
first three months of fiscal 2002 over the corresponding prior year period,
reflecting an increase in the overall customer installed base.

Services Revenues. Services revenues consist of support, consulting and
education services revenues which comprised 61%, 33% and 6% of total services
revenues, respectively, for the first quarter of fiscal 2002 and 58%, 36% and
6% of total services revenues, respectively, for the corresponding prior year
period. Support revenues increased 9% for the first three months of fiscal 2002
from the corresponding prior year period, reflecting an increase in the overall
customer installed base. Support revenues excluding license updates also
increased 9% for the first three months of fiscal 2002 from the corresponding
prior year period. Consulting revenues decreased 4% for the first three months
of fiscal 2002 from the corresponding prior year period. The decline in the
consulting services revenues experienced in the first three months of fiscal
2002 was primarily due to a decrease in the demand for these services as a
result of the following: i) a slowdown in the business applications market, ii)
a push towards a partner model, leveraging third party consulting firms who
provide consulting services to the Company's customers and iii) shorter
implementation engagements for Oracle's newer generation of products. Education
revenues decreased 1% for the first three months of fiscal 2002 from the
corresponding prior year period primarily due to a slow down in license revenue
growth, as well as customers reducing discretionary spending due to the weak
economic conditions in the United States.

                                      12



Operating expenses



                             Three Months Ended August 31,
                             -----------------------------
(in thousands)                  2001     Change    2000
---------------------------  ----------  ------ ----------
                                       
Sales and marketing......... $  535,481   (7%)  $  572,964
Cost of services............    609,873   (9%)     673,878
Research and development....    253,299    1%      251,027
General and administrative..     97,614   (8%)     105,965
                             ----------         ----------
   Total operating expenses. $1,496,267   (7%)  $1,603,834
                             ==========         ==========
Percent of Revenues:
Sales and marketing.........        24%                25%
Cost of services............        27%                30%
Research and development....        11%                11%
General and administrative..         4%                 5%
                             ----------         ----------
   Total operating expenses.        66%                71%
                             ==========         ==========


Total Operating Expenses. Total operating expenses decreased 7% for the first
three months of fiscal 2002 from the corresponding prior year period. Operating
expenses were favorably affected during the first three months of fiscal 2002
as a result of the U.S. dollar strengthening against certain major
international currencies. Excluding the effect of currency rate fluctuations,
total operating expenses decreased 4% for the first three months of fiscal 2002
from the corresponding prior year period. The decrease in total operating
expenses was due in part to productivity improvements derived from using the
Company's E-Business suite to streamline business processes and implementation
of various other cost cutting measures. Total operating expenses for the first
three months of fiscal 2002 were also favorably affected by a reduction of
compensation expenses due to certain bonus payments being lower than what was
previously accrued for.

Sales and Marketing Expenses. The Company continues to place significant
emphasis, both domestically and internationally, on direct sales through its
own sales force. However, the Company also continues to market its products
through indirect channels. Sales and marketing expenses decreased 7% for the
first three months of fiscal 2002 from the corresponding prior year period. As
a percentage of licenses and other revenues, sales and marketing expenses were
73% and 71% for the first three months of fiscal 2002 and 2001, respectively.
The increase in sales and marketing expenses as a percentage of licenses and
other revenues in the first quarter of fiscal 2002 was due primarily to a
decrease in license revenues due to economic uncertainties. Excluding the
effect of currency rate fluctuations, sales and marketing expenses decreased 4%
for the first three months of fiscal 2002 from the corresponding prior year
period. The decrease was primarily due to lower commission related expenses as
a result of lower sales.

Cost of Services. The cost of providing services consists largely of
consulting, education and support personnel expenses. Cost of services expenses
decreased by 9% in the first quarter of fiscal 2002 from the corresponding
prior year period. As a percentage of services revenues, cost of services was
40% for the first three months of fiscal 2002, compared to 46% for the
corresponding prior year period. The decrease in cost of services as a
percentage of services revenues was due primarily to support revenues, which
have relatively higher margins, constituting a higher percentage of total
services revenues. Excluding the effect of currency rate fluctuations, cost of
services decreased 7% for the first three months of fiscal 2002 from the
corresponding prior year period. The decrease was primarily due to increased
productivity efficiencies and controls over headcount and headcount related
expenditures in the support, consulting, and education lines of business.

Research and Development Expenses. Research and development expenses increased
1% for the first three months of fiscal 2002 over the corresponding prior year
period. As a percentage of total revenues, research and development expenses
remained relatively constant at 11% for the first three months of fiscal 2002
and 2001.

                                      13



Excluding the effect of currency rate fluctuations, research and development
expenses increased 2% for the first three months of fiscal 2002 over the
corresponding prior year period. Expenses were favorably affected by the
reduction of compensation expenses previously discussed. The Company believes
that research and development expenditures are essential to maintaining its
competitive position and expect these costs to continue to increase and
constitute a significant percentage of revenues.

General and Administrative Expenses. General and administrative expenses
decreased 8% for the first three months of fiscal 2002 from the corresponding
prior year period. As a percentage of revenues, general and administrative
expenses was 4% for the first three months of fiscal 2002, as compared to 5%
for the corresponding prior year period. Excluding the effect of currency rate
fluctuations, general and administrative expenses decreased 3% for the first
three months of fiscal 2002 over the corresponding prior year period. The
decrease was primarily due to the reduction of compensation expenses previously
discussed.

Net Investment Gains (Losses) Related To Equity Securities

Net investment gains (losses) related to equity securities for the periods
ended August 31, 2001 and August 31, 2000 primarily reflect the net results of
sales of marketable securities, the Company's equity share in the results of
non-consolidated investees, and provision for losses related to investments in
other companies.

Other Income, Net

Other income, net, consists primarily of interest income, interest expense,
foreign currency exchange gains and losses, and the minority interest share in
the net profits of Oracle Japan. Other income, net, for the first three months
of fiscal 2002 decreased 58% from the corresponding prior year period. The
decrease was primarily due to lower interest income as a result of lower
average cash balances throughout the first quarter of fiscal 2002 and lower
interest rates in fiscal 2002, as well as an increase in the minority interest
share in the net profits of Oracle Japan.

Provision for Income Taxes

The Company's effective tax rates have historically differed from the federal
statutory rate primarily because of state taxes. The effective tax rate was
35.0% for the first three months of fiscal 2002, as compared to 35.5% for the
corresponding prior year period.

Liquidity and Capital Resources:



                                                  Three Months Ended August 31,
                                                 -------------------------------
(in thousands)                                      2001      Change    2000
------------------------------------------------ -----------  ------ -----------
                                                            
Working capital................................. $ 4,510,574    14%  $ 3,951,486
Cash and cash investments.......................   6,336,975    23%    5,132,572
Cash provided by (used for) operating activities   1,263,568     *      (873,807)
Cash provided by (used for) investing activities  (1,104,585)    *       147,474
Cash used for financing activities..............    (713,568)  (62%)  (1,862,377)

--------
* not meaningful

Working capital as of August 31, 2001 was 14% higher than at the end of the
corresponding prior year period, due primarily to improved cash flows from
operations which was partially offset by cash used for the repurchase of the
Company's Common Stock and cash used for other long-term investing activities.

The positive cash flows generated from operations during the first three months
of fiscal 2002 were primarily attributable to improved profitability and a
decrease in trade receivables. The negative cash flows from

                                      14



operations incurred in the first three months of fiscal 2001 were primarily due
to the payment of taxes related to the gain on sale of Oracle Japan stock that
occurred in the fourth quarter of fiscal 2000.

The negative cash flows from investing activities during the first three months
of fiscal 2002 related to cash investment purchases and investments in capital
expenditures, partially offset by maturities of cash investments. The positive
cash flows generated from investing activities during the first three months of
fiscal 2001 primarily reflected increased maturities of cash investments,
partially offset by investments in capital expenditures. The Company expects to
continue to invest in capital and other assets to support its growth.

The Company incurred negative cash flows from financing activities during the
first three months of fiscal 2002 and fiscal 2001, primarily reflecting Common
Stock repurchases. Since 1992 the Company's Board of Directors has cumulatively
approved the repurchase of 1.1 billion shares, plus an additional amount of
$3.0 billion to reduce the dilutive effect of shares issued under its various
employee stock plans. During the three months ended August 31, 2001,
approximately 42.1 million shares of Common Stock were repurchased for an
aggregate price of approximately $753.8 million. As of August 31, 2001, the
Company has repurchased in excess of 1.1 billion shares for an aggregate price
of approximately $12.1 billion and has approximately $2.6 billion available for
future repurchases. The Company has primarily used cash flows from operations
and investing activities to fund its repurchases.

During the first quarter of fiscal 1997, the Company issued $150.0 million in
6.72% Senior Notes due in the year 2004 and $150.0 million in 6.91% Senior
Notes due in the year 2007. The Senior Notes are unsecured general obligations
that rank on parity with all of its other unsecured and unsubordinated
indebtedness that may be outstanding. As of August 31, 2001, the Company also
had other outstanding debt of approximately $4.4 million, primarily in the form
of other notes payable and capital leases.

The Company believes that its current cash and cash investment balances, as
well as anticipated cash flows generated from operations, will be sufficient to
meet its working capital, capital expenditure, and investment needs through at
least the next 12 months.

Factors That May Affect Future Results and Market Price of Stock

The Company operates in a rapidly changing environment that involves numerous
risks, some of which are beyond its control. The following discussion
highlights some of these risks.

Revenue Growth and Economic Conditions. The revenue growth and profitability of
the Company's business depends on the overall demand for computer software and
services, particularly in the product segments in which the Company competes.
Because the Company's sales are primarily to corporate and government
customers, its business also depends on general economic and business
conditions. A softening of demand for computer software caused by a weakening
of the economy may result in decreased revenues and has resulted and may
continue to result in lower revenue growth rates. In particular, one of the
challenges the Company continues to face in promoting future growth in license
revenues is the successful refocusing of its marketing and sales efforts to its
business applications suite. In addition, recent terrorist attacks upon the
U.S. have added (or exacerbated) economic, political and other uncertainties,
which could adversely affect the Company's revenue growth. There can be no
assurances that the Company will be able to effectively promote future revenue
growth in its systems software and business applications areas.

In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-2, "Software Revenue
Recognition" which superceded SOP No. 91-1. SOP No. 97-2, as amended by SOP No.
98-4 and SOP No. 98-9, provides guidance on applying generally accepted
accounting principles for software revenue recognition transactions. In
December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements," which provides further revenue
recognition guidance. The Company adopted SAB No. 101, as amended, in the
fourth quarter of fiscal 2001 as required. The adoption

                                      15



of SAB No. 101 did not have a material effect on the Company's consolidated
financial position, results of operations or cash flows. The accounting
profession continues to review certain provisions of SOP No. 97-2 and SAB No.
101 with the objective of providing additional guidance on implementing its
provisions. Depending upon the outcome of these reviews and the issuance of
implementation guidelines and interpretations, the Company may be required to
change its revenue recognition policies and business practices and such changes
could have a material adverse effect on the Company's business, results of
operations or financial position.

New Products. The markets for the Company's products are characterized by rapid
technological advances in hardware and software development, evolving standards
in computer hardware and software technology and frequent new product
introductions and enhancements. Product introductions and short product life
cycles necessitate high levels of expenditures for research and development. To
maintain its competitive position, the Company must enhance and improve
existing products and continue to introduce new products and new versions of
existing products that keep pace with technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance.
The Company's inability to run on new or increasingly popular operating
systems, or the Company's failure to successfully enhance and improve its
products in a timely manner and position and/or price its products to meet
market demands, could have a material adverse effect on the Company's business,
results of operations, financial condition or cash flows.

Significant undetected errors or delays in new products or new versions of a
product may affect market acceptance of the Company's products and could have a
material adverse effect on the Company's business, results of operations,
financial condition or cash flows. If the Company were to experience delays in
the commercialization and introduction of new or enhanced products, if
customers were to experience significant problems with the implementation and
installation of products, or if customers were dissatisfied with product
functionality or performance, this could have a material adverse effect on the
Company's business, results of operations, financial condition or cash flows.

There can be no assurance that the Company's new products will achieve broad
market acceptance or will generate significant revenue. Additional products
that the Company plans to directly or indirectly market in the future are in
various stages of development.

Sales Forecasts. Management uses a "pipeline" system, a common industry
practice, to forecast sales and trends in the Company's business. The Company's
sales personnel monitor the status of all proposals, such as the date when they
estimate that a customer will make a purchase decision and the potential dollar
amount of the sale. The Company aggregates these estimates periodically in
order to generate a sales pipeline. The Company compares the pipeline at
various points in time to look for trends in its business. While this pipeline
analysis may provide the Company with some guidance in business planning and
budgeting, these pipeline estimates are necessarily speculative and may not
consistently correlate to revenues in a particular quarter or over a longer
period of time. A variation in the conversion of the pipeline into contracts or
in the pipeline itself could cause the Company to improperly plan or budget and
thereby adversely affect its business or results of operations. In particular,
as was the case in the second half of fiscal 2001 and the first quarter of
fiscal 2002, a slowdown in the economy may cause purchasing decisions to be
delayed, reduced in amount or cancelled which will therefore reduce the overall
license pipeline conversion rates in a particular period of time.

Management of Growth. The Company has a history of rapid growth. However, the
Company has at times experienced slowing growth in a number of areas. The
Company's future operating results will depend on its ability to manage growth,
accurately forecast revenues and control expenses. The Company's future
operating results may also be adversely impacted by external factors, such as a
slowing in demand for hardware used in conjunction with its software. A decline
in the growth rate of revenues without a corresponding and timely slowdown in
expense growth could have a material adverse effect on the Company's business,
results of operations, financial condition, or cash flows.

Pricing. Intense competition in the various markets in which the Company
competes may put pressure on the Company to reduce prices on certain products,
particularly in markets where certain vendors offer deep discounts

                                      16



in an effort to recapture or gain market share or to sell other software or
hardware products. Moreover, the Company has recently changed its pricing model
for its system software products and any broadly based changes to the Company's
prices and pricing policies could lead to a decline or delay in sales and
license revenue as the Company's sales force implements and its customers
adjust to the new pricing policies. The bundling of software products for
promotional purposes or as a long-term pricing strategy or guarantees of
product implementations by certain of the Company's competitors could, over
time, significantly reduce the prices that the Company can charge for its
products. Changes in customer use of the Company's products could also result
in lower license revenues if the Company's pricing model is not adapted to such
usage. Shifts toward the use of operating systems on which the Company
experiences relatively greater price competition could result in lower average
license prices, thereby reducing the Company's license revenues. Additionally,
while the distribution of applications through application service providers
may provide a new market for the Company's products, these new distribution
methods could also reduce the price paid for the Company's products or
adversely affect other sales of its products. Any such price reductions and
resulting lower license revenues could have a material adverse effect on the
Company's business, results of operations, financial condition, or cash flows
if the Company cannot offset these price reductions with a corresponding
increase in sales volumes or lower spending.

Competitive Environment. The computer software industry is an intensely
competitive industry with several large vendors that develop and market
databases, application development tools, business applications and business
intelligence products. Certain of these vendors have significantly greater
financial and technical resources than the Company. The introduction of new
competitive products into one or more of the Company's various markets, the
addition of new functionality into an existing competitive product or the
acquisition by one of its competitors of a product could have a material
adverse effect on the Company's business, results of operations, financial
condition or cash flows. In addition, new distribution methods (e.g. electronic
channels) and opportunities presented by the Internet and electronic commerce
have removed many of the barriers to entry historically faced by small and
start-up companies in the software industry. The Company expects to continue to
face intense competition in the various markets in which it competes.

International Sales. A substantial portion of the Company's revenues is derived
from international sales and is therefore subject to the related risks,
including the general economic conditions in each country, the overlap of
different tax structures, the difficulty of managing an organization spread
over various countries, changes in regulatory requirements, compliance with a
variety of foreign laws and regulations, longer payment cycles and volatilities
of exchange rates in certain countries. There can be no assurances that the
Company will be able to successfully address each of these challenges. Other
risks associated with international operations include import and export
licensing requirements, trade restrictions and changes in tariff rates.

A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar. Changes in the value of major foreign currencies
relative to the value of the U.S. dollar adversely affected revenues and
operating results in the first quarter of fiscal 2002, particularly in Europe
and will continue to do so throughout fiscal 2002 if the U.S. dollar
strengthens relative to foreign currencies.

Foreign currency transaction gains and losses are primarily related to
sublicense fee and other agreements between the Company and its subsidiaries
and selling distributors. These gains and losses are charged against earnings
in the period incurred. The Company has reduced its transaction and translation
gains and losses associated with converting foreign currencies into U.S.
dollars by using foreign exchange forward contracts to hedge transaction and
translation exposures in major currencies. The Company finds it impractical to
hedge all foreign currencies in which it conducts business. As a result, the
Company will continue to experience foreign currency gains and losses.

Hiring and Retention of Employees. The Company's continued growth and success
depend to a significant extent on the continued service of its senior
management and other key employees and the hiring of new qualified employees.
Competition for highly-skilled business, product development, technical and
other personnel continues to be substantial due to relatively low overall
unemployment rates. Accordingly, the

                                      17



Company may experience increased compensation costs that may not be offset
through either improved productivity or higher prices. There can be no
assurances that the Company will be successful in continuously recruiting new
personnel and in retaining existing personnel. In general, the Company does not
have long-term employment or non-competition agreements with its employees. The
loss of one or more key employees or the Company's inability to attract
additional qualified employees or retain other employees could have a material
adverse effect on its continued growth.

New Business Areas. The Company has in recent years expanded its technology
into a number of new business areas, including on-line exchanges for a number
of business procurement needs, Internet/electronic commerce, on-line business
services, wireless initiatives and Internet computing. These areas are
relatively new to the Company's product development and sales and marketing
personnel. There can be no assurances that the Company will compete effectively
or will generate significant revenues in these new areas. The success of
Internet computing and, in particular, the Company's current Internet computing
software products is difficult to predict because Internet computing represents
a method of computing that is new to the entire computer industry. The
widespread adoption of Internet computing will depend in large measure on (i)
the lower cost of ownership of Internet computing relative to client/server
architecture, (ii) the ease of use and administration relative to client/server
architecture and (iii) how hardware and software vendors choose to compete in
this market. There can be no assurances that sufficient numbers of vendors will
undertake this commitment, that the market will accept Internet computing or
that Internet computing will generate significant revenues for the Company.

Uneven Patterns of Quarterly Operating Results and Revenues. The Company's
revenues in general and its license revenues in particular, are relatively
difficult to forecast and vary from quarter to quarter due to various factors,
including the (i) relatively long sales cycles for the Company's products, (ii)
size and timing of individual license transactions, the closing of which tend
to be delayed by customers until the end of a fiscal quarter as a negotiating
tactic, (iii) introduction of new products or product enhancements by the
Company or its competitors, (iv) potential for delay or deferral of customer
implementations of the Company's software, (v) changes in customer budgets,
(vi) seasonality of technology purchases and other general economic conditions,
and (vii) changes in the Company's pricing policies or those of its
competitors. Accordingly, the Company's quarterly results are difficult to
predict until the end of the quarter, and delays in product delivery or closing
of sales near the end of a quarter have historically caused and could cause
quarterly revenues and net income to fall significantly short of anticipated
levels.

The Company's license revenues in any quarter are substantially dependent on
orders booked and shipped in that quarter. Because the Company's operating
expenses are based on anticipated revenue levels and because a high percentage
of its expenses are relatively fixed, a delay in the recognition of revenue
from even a limited number of license transactions could cause significant
variations in operating results from quarter to quarter and could cause net
income to fall significantly short of anticipated levels.

California has recently experienced ongoing power system shortages, which have
resulted in "rolling blackouts," and the bankruptcy filing by one of the major
California public utilities may increase the number and severity of these
blackouts. These blackouts, blackouts in other regions or procedures
implemented to avert blackouts could cause disruptions to the Company's
operations and the operations of the Company's customers. Such disruptions,
particularly at the end of a quarter, could adversely affect quarterly revenues
and net income by delaying the closing of a number of licensing transactions.

Uncertainty of Emerging Areas. Despite tremendous growth in emerging areas such
as the Internet, on-line services and electronic commerce, the impact on the
Company of this growth is uncertain. There can be no assurances that the
Company will be able to provide a product offering that will satisfy new
customer demands in these areas and the growth patterns of these areas may vary
significantly. In addition, standards for network protocols, as well as other
industry adopted and de facto standards for the Internet, are evolving rapidly.
There can be no assurances that standards chosen by the Company will position
its products to compete effectively for business opportunities as they arise on
the Internet and in other emerging areas.

                                      18



Future Acquisitions. As part of its business strategy, the Company has made and
expects to continue to make acquisitions of, or significant investments in,
businesses that offer complementary products, services and technologies. Any
acquisitions or investments will be accompanied by the risks commonly
encountered in acquisitions of businesses. Such risks include, among other
things, the possibility that the Company pays much more than the acquired
company or assets are worth, the difficulty of assimilating the operations and
personnel of the acquired businesses, the potential product liability
associated with the sale of the acquired company's products, the potential
disruption of the Company's ongoing business, the distraction of management
from the Company's business, the inability of management to maximize the
Company's financial and strategic position, the maintenance of uniform
standards, controls, procedures and policies and the impairment of
relationships with employees and clients as a result of any integration of new
management personnel. These factors could have a material adverse effect on the
Company's business, results of operations, financial condition or cash flows,
particularly in the case of a larger acquisition. Consideration paid for future
acquisitions, if any, could be in the form of cash, stock, stock purchase
rights or a combination thereof. Dilution to existing stockholders and to
earnings per share may result in connection with any such future acquisitions.

Relative Product Profitability. Certain of the Company's revenues are derived
from products that, as a percentage of revenues, currently require a higher
level of development, distribution and support expenditures compared to certain
of its other products. To the extent that revenues generated from such products
become a greater percentage of the Company's total revenues, the Company's
operating margins may be adversely affected, unless the expenses associated
with such products decline as a percentage of revenues.

Long-term Investment Cycle. Developing and localizing software is expensive and
the investment in product development often involves a long payback cycle. The
Company's plans for the fiscal year ending May 31, 2002 include significant
investments in software research and development and related product
opportunities from which significant revenues are not anticipated for several
years.

Sales Force Restructuring. The Company historically has relied heavily on its
direct sales force. In many years, the Company has restructured or made other
adjustments to its sales force at least once a year. These changes have
generally resulted in a temporary lack of focus and reduced productivity by the
Company's sales force that may have affected revenues in a quarter. There can
be no assurances that the Company will not continue to restructure its sales
force or that the related transition issues associated with restructuring the
sales force will not recur.

Enforcement of the Company's Intellectual Property Rights. The Company relies
on a combination of copyright, patent, trademark, trade secrets,
confidentiality procedures and contractual procedures to protect its
intellectual property rights. Despite the Company's efforts to protect its
intellectual property rights, it may be possible for unauthorized third parties
to copy certain portions of the Company's products or to reverse engineer or
obtain and use technology or other information that the Company regards as
proprietary. There can also be no assurances that the Company's intellectual
property rights would survive a legal challenge to their validity or provide
significant protection for the Company. In addition, the laws of certain
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States. Accordingly, there can be no assurances that
the Company will be able to protect its proprietary technology against
unauthorized third party copying or use, which could adversely affect the
Company's competitive position.

Possibility of Infringement Claims. The Company from time to time receives
notices from third parties claiming infringement by the Company's products of
third party patent and other intellectual property rights. The Company expects
that software products will increasingly be subject to such claims as the
number of products and competitors in the Company's industry segments grows and
the functionality of products overlaps. In addition, the Company expects to
receive more patent infringement claims as companies increasingly seek to
patent their software, especially in light of recent developments in the law
that extend the ability to patent software. Regardless of its merit, responding
to any such claim could be time-consuming, result in costly litigation and
require the Company to enter into royalty and licensing agreements that may not
be available on

                                      19



terms acceptable to the Company. If a successful claim is made against the
Company and the Company fails to develop or license a substitute technology,
the Company's business, results of operations, financial condition or cash
flows could be materially adversely affected.

Possible Volatility of Stock Price. The market price of the Company's Common
Stock has experienced significant fluctuations and may continue to fluctuate
significantly. The market price of the Company's Common Stock may be
significantly affected by factors such as the announcement of new products or
product enhancements by the Company or its competitors, technological
innovation by the Company or its competitors, quarterly variations in the
Company's or its competitors' results of operations, changes in prices of the
Company's or its competitors' products and services, changes in revenue and
revenue growth rates for the Company as a whole or for specific geographic
areas, business units, products or product categories, changes in earnings
estimates by market analysts, speculation in the press or analyst community and
general market conditions or market conditions specific to particular
industries. The stock prices for many companies in the technology sector have
experienced wide fluctuations that often have been unrelated to their operating
performance. Such fluctuations may adversely affect the market price of the
Company's Common Stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. The Company's exposure to market risk for changes in
interest rates relates primarily to the Company's investment portfolio. The
Company places its investments with high credit quality issuers and, by policy,
limits the amount of credit exposure to any one issuer. As stated in its
policy, the Company is adverse to principal loss and seeks to preserve its
invested funds by limiting default risk, market risk and reinvestment risk.

The Company mitigates default risk by investing in only high credit quality
securities that it believes to be low risk and by positioning its portfolio to
respond appropriately to a significant reduction in a credit rating of any
investment issuer or guarantor. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio
liquidity.

The table below presents the amortized principal amount, related weighted
average interest rates and maturities for the Company's investment portfolio.
Short-term and long-term investments are all in fixed rate instruments. The
amortized principal amount approximates fair value at August 31, 2001.

Table of Investment Securities:



                                      Amortized
                                      Principal    Weighted Average
                                        Amount      Interest Rate
                                    -------------- ----------------
                                    (in thousands)
                                             
Cash and cash equivalents..........   $3,915,579        3.18%
Short term investments (0-1 year)..    2,135,852        3.87%
Long term investments (1-2 years)..      285,544        4.13%
                                      ----------
   Total cash and cash investments.   $6,336,975
                                      ==========


Foreign Currency Risk. The Company transacts business in various foreign
currencies. The Company has established a foreign currency hedging program,
which was approved by the Board of Directors, that primarily utilizes foreign
currency forward exchange contracts ("forward contracts") to hedge certain
foreign currency transaction exposures. Under this program, increases or
decreases in the Company's foreign currency transactions are offset by gains
and losses on the forward contracts, so as to mitigate the possibility of
foreign currency transaction gains and losses. The Company does not use forward
contracts for trading purposes. All foreign currency transactions and all
outstanding forward contracts are marked to market at the end of the period
with unrealized gains and losses included in other income (expense). The
Company's ultimate realized gain or loss with respect to currency fluctuations
will depend on the currency exchange rates and other factors in effect

                                      20



as the contracts mature. The unrealized gain (loss) on the outstanding forward
contracts at August 31, 2001 was immaterial to the Company's consolidated
financial statements.

The Company also hedges the net assets of certain of its international
subsidiaries ("net investment hedges"). As indicated in the Company's Form 10-K
for the fiscal year ended May 31, 2001, the Company adopted Statement of
Financial Accounting Standards ("SFAS") 133, "Accounting for Derivative
Instruments and for Hedging Activities," as of June 1, 2001 whereby the Company
elected to designate the changes in forward exchange rates for the measurement
of effectiveness in net investment hedges. Upon further review, the Company
believes that using the changes in spot exchange rates better meets the
Company's risk management strategies, better reflects the economics of those
strategies in the Company's financial statements, and better manages interest
rate differentials between different countries. Accordingly, effective
September 1, 2001, the Company has decided to designate the changes in spot
exchange rates for the measurement of effectiveness in net investment hedges.
Under this new accounting method, the effective portion of changes in the fair
value of the hedging instruments are recorded as a component of accumulated
other comprehensive income (loss) in stockholders' equity. Changes in the fair
value of the portion of the hedging instruments excluded from the effectiveness
assessment are recorded in earnings.

The tables below present the notional amounts (at contract exchange rates) and
the weighted average contractual foreign currency exchange rates for the
Company's net investment hedges and outstanding forward contracts as of August
31, 2001. Notional weighted average exchange rates are quoted using market
conventions where the currency is expressed in currency units per U.S. dollar,
except for Australia, New Zealand, UK and the Euro. The net investment hedges
and forward contracts mature in ninety days or less as of August 31, 2001.

Table of Net Investment Hedges



                                        Notional
                        Notional    Weighted Average
                         Amount      Exchange Rate
                     -------------- ----------------
                     (in thousands)
                              
Functional Currency:
   Japanese Yen.....    $32,342          120.59
                        -------
       Total........    $32,342
                        =======



                                      21



Table of Forward Contracts



                                           Notional
                           Notional    Weighted Average
                            Amount      Exchange Rate
                        -------------- ----------------
                        (in thousands)
                                 
Functional Currency:
   Argentine Peso......    $ 17,930           1.13
   Australian Dollar...       3,946           0.53
   Brazilian Real......       4,550           2.68
   Canadian Dollar.....         246           1.55
   Chilean Peso........       4,984         663.25
   Chinese Renminbi....      44,636           8.29
   Columbian Peso......       1,029           2355
   Danish Krone........       5,524           8.20
   Euro................      83,956           0.91
   Indian Rupee........      16,523          47.56
   Israeli Shekel......      42,023           4.29
   Japanese Yen........       6,385         118.26
   Korean Won..........      16,692        1290.12
   Mexican Peso........      17,765           9.31
   New Zealand Dollar..         373           0.44
   Norwegian Krone.....       6,821           8.94
   Peruvian New Sol....       1,645           3.53
   Philippine Peso.....       7,380          52.42
   Polish Zloty........      12,789           4.36
   Saudi Arabian Riyal.      20,729           3.75
   Singapore Dollar....      35,669           1.74
   Slovakian Koruna....       1,339          47.78
   South African Rand..       9,311           8.47
   Swedish Krona.......       5,450          10.40
   Swiss Franc.........      33,398           1.66
   Taiwan Dollar.......       1,999          34.79
   Thai Baht...........       1,196          44.30
   UK Pound............     131,346           1.45
                           --------
       Total...........    $535,634
                           ========


                                      22



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Shareholder class actions were filed in the United States District Court for
the Northern District of California against the Company and its Chief Executive
Officer on and after March 9, 2001. On June 20, 2001 the Court consolidated the
class actions into a single action and appointed lead plaintiff and class
counsel. A consolidated amended complaint adding the Chief Financial Officer
and an Executive Vice President as defendants was filed on August 3, 2001. The
consolidated amended complaint is brought on behalf of purchasers of the stock
of the Company during the period December 15, 2000 through March 1, 2001.
Plaintiffs allege that the defendants made false and misleading statements
about the Company's actual and expected financial performance and the
performance of certain of its applications products, while certain individual
defendants were selling Company stock, in violation of Federal securities laws.
Plaintiffs further allege that certain individual defendants sold Company stock
while in possession of material non-public information. The Company has filed a
motion to dismiss the consolidated action. The hearing on the motion to dismiss
is currently scheduled for December 18, 2001. The Company believes that it has
meritorious defenses against these actions and intends to vigorously defend
them.

Shareholder derivative lawsuits were filed in the Superior Court of the State
of California, County of San Mateo and County of Santa Clara on and after March
12, 2001. Three similar shareholder derivative lawsuits were filed in the Court
of Chancery in the State of Delaware in and for New Castle County. The
derivative suits were brought by Company stockholders, allegedly on behalf of
the Company, against all of the Company's directors. The derivative plaintiffs
allege that these directors breached their fiduciary duties to the Company by
making or causing to be made alleged misstatements about the Company's revenue,
growth, and the performance of certain of its applications products while
certain officers and directors sold Company stock and by allowing the Company
to be sued in the shareholder class actions. The derivative plaintiffs seek
compensatory and other damages, disgorgement of compensation received, and a
declaration that the defendants breached their fiduciary duties. The Company
has not yet responded to these complaints.

Shareholder class actions were filed in the Superior Court of the State of
California, County of San Mateo against the Company and its Chief Financial
Officer and former President and Chief Operating Officer on and after December
18, 1997. The class actions were brought on behalf of purchasers of the stock
of the Company during the period April 29, 1997 through December 9, 1997.
Plaintiffs allege that the defendants made false and misleading statements
about the Company's actual and expected financial performance, while selling
Company stock, in violation of state securities laws. Plaintiffs further allege
that the individual defendants sold Company stock while in possession of
material non-public information. Discovery is ongoing in these actions. The
Company believes that it has meritorious defenses to these actions and is
vigorously defending them.

A related shareholder derivative lawsuit was filed in the Superior Court of the
State of California, County of San Mateo on November 17, 1998. The derivative
suit was brought by Company stockholders, allegedly on behalf of the Company,
against certain of the Company's current and former officers and directors. The
derivative plaintiffs allege that these officers and directors breached their
fiduciary duties to the Company by making or causing to be made alleged
misstatements about the Company's revenue, growth, and financial status while
certain officers and directors sold Company stock and by allowing the Company
to be sued in the shareholder class actions. The derivative plaintiffs seek
compensatory and other damages, disgorgement of compensation received and
temporary and permanent injunctions requiring the defendants to relinquish
their directorships. On January 15, 1999, the Court entered a stipulation and
order staying the action until further notice.

The Company filed petitions with the United States Tax Court on July 29, 1998,
challenging notices of deficiency issued by the Commissioner of Internal
Revenue that disallowed certain foreign sales corporation commission expense
deductions taken by the Company in its 1988 through 1991 tax years and assessed
additional taxes for those years in excess of $20 million, plus interest. In a
separate action filed by Microsoft

                                      23



Corporation, the Tax Court ruled on September 15, 2000, in favor of the
Commissioner of Internal Revenue on the same legal issue presented in the
Company's case. If allowed to stand and if followed by the Tax Court in the
Company's case, the Microsoft ruling may be dispositive of that issue in the
Company's case and could result in additional Federal and State taxes up to
$130 million, plus interest accruing at applicable Federal and State rates, for
the tax years at issue in the case and for the Company's subsequent tax
filings. The Company filed a motion requesting the Tax Court to certify the
controlling legal issue in its case for immediate appeal to the Ninth Circuit
Court of Appeals. Thereafter, the Company's case was reassigned to the judge
presiding in the Microsoft action and the Tax Court issued an order staying the
Company's case until a final adjudication of the same legal issue in the
Microsoft action. The Company intends to defend its position vigorously and
does not believe that the final outcome will have a material adverse effect on
its consolidated financial position, results of operations or cash flows.

The Company is currently party to various legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, the Company
does not believe that the outcome of any of these or any of the above mentioned
legal matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

18.1 Accountants preferability letter regarding change in accounting principle
pursuant to SFAS 133.

(b) Reports on Form 8-K

None

                                      24



                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Oracle
Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          ORACLE CORPORATION

Dated: October 12, 2001
                                              /S/ JEFFREY O. HENLEY
                                          By: _________________________________
                                              Jeffrey O. Henley
                                              Executive Vice President and
                                              Chief Financial Officer

Dated: October 12, 2001
                                              /S/ JENNIFER L. MINTON
                                          By: _________________________________
                                              Jennifer L. Minton
                                              Senior Vice President and
                                              Corporate Controller

                                      25



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