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In July
1997, the Securities and Exchange Commission (“SEC”) issued
a formal order of private investigation of the Company and
certain unidentified other entities and persons with respect
to non-specified accounting matters, public disclosures and
trading activity in the Company’s securities. During the course
of the investigation, the Company learned that the investigation
concerned the events leading to the restatement of the Company’s
financial statements, including fiscal years 1994, 1995 and
1996, that was publicly announced in November 1997. The Company
and the SEC have entered into a settlement of the investigation
as to the Company. Pursuant to the settlement, the Company
consented to the entry by the SEC of an Order Instituting
Public Administrative Proceedings Pursuant to Section 8A of
the Securities Act of 1933 and Section 21C of the Securities
Exchange Act of 1934, Making Findings, and Imposing a Cease
and Desist Order (the “Order”). The Order was issued by the
SEC on January 11, 2000. Pursuant to the Order, the Company
neither admitted nor denied the findings, except as to jurisdiction,
contained in the Order. See “Factors Affecting Operating Results
– Settlement of SEC investigation could harm our business.”
RESULTS
OF OPERATIONS
The
following table and discussion compares the results of operations
for the years ended December 31, 1999, 1998 and 1997.
Our
operating results for 1999 improved over the prior year due
to revenue growth of 18% while costs and expenses increased
by only 13% when compared to 1998. Growth in consolidated
revenues was experienced by all regions during fiscal 1999
as sales increased by 20%, 19%, 18% and 18% in Latin America,
North America, Europe and Asia/Pacific, respectively. As a
percentage of net revenues, all operating expense categories
for 1999 either decreased or remained consistent when compared
to 1998 as we continued our effort to keep operating expenses
in line with revenues. Revenue growth combined with lower
operating costs resulted in an increase of $45.2 million,
or 85%, in operating income to $98.5 million for 1999 from
$53.3 million in 1998.
R
e v e n u e s
We derive
revenues from licensing software and providing post-license
technical product support and updates to customers and from
consulting and training services.
License
Revenues.
License revenues may involve the shipment of product by us
or the granting of a license to a customer to manufacture
products. Our products are sold directly to end-user customers
or through resellers, including OEMs, distributors and value
added resellers (VAR’s). License revenues for 1999 increased
15% to $442.8 million from $383.9 million in 1998. The higher
license revenue growth rate experienced in 1999 was due to
continued demand for our established products and the introduction
and market positioning of new products and versions including
our Red Brick and Cloudscape product offerings. Each of our
regions reported increased license revenues for fiscal 1999
when compared to fiscal 1998, as follows:
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Europe,
Middle-East and Africa (“EMEA”) license revenues increased
to $148.4 million as compared to $125.2 million, an increase
of 19% |
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North
America license revenues increased to $200.4 million as
compared to $170.2 million, an increase of 18% |
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Latin
America license revenues increased to $36.3 million as
compared to $33.9 million, an increase of 7% |
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Asia/Pacific
license revenues increased to $57.7 million as compared
to $54.6 million, an increase of 6% |
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