License revenues for 1998 increased slightly to $383.9 million from $378.2 million in 1997. This modest increase in license revenues reflected a number of factors which affected us during 1998, including an overall decrease in revenue growth rates in the RDBMS industry worldwide, continued uncertainty in the Asia/Pacific economies and financial markets as well as changes to our European management.

Our increased focus on reseller channels in 1996 resulted in a significant build-up of licenses that had not been resold or utilized by the resellers. As discussed in Note 1 to our Consolidated Financial Statements, revenue from license agreements with resellers is recognized as earned by us when the licenses are resold or utilized by the reseller and all of our related obligations have been satisfied. Accordingly, amounts received from customers and financial institutions in advance of revenue being recognized are recorded as a liability in “advances from customers and financial institutions” in our Consolidated Financial Statements. Advances in the amount of $34.3 million and $121.1 million had not been recognized as earned revenue as of December 31, 1999 and 1998, respectively. During the year ended December 31, 1999, we received $6.5 million in customer advances and recognized revenue from previously recorded customer advances of $82.0 million. Included in the $82.0 million recognized were $69.1 million of licenses which were resold or utilized by the reseller, $11.4 million related to contractual reductions in customer advances and $1.5 million related to previously-deferred revenue for solution sales which has now been recognized.

Contractual reductions result from settlements between us and resellers in which the customer advance contractually expires or a settlement is structured wherein the rights to resell our products terminate without sell through or deployment of the software. As of December 31, 1999, we had reached structured settlements with three resellers with remaining rights to resell a total of $1.0 million of our products, which will be utilized by December 31, 2000 pursuant to the minimum future reduction terms of the settlement.

Management believes that the level of licenses sold through these resellers is likely to continue; however, revenue may not be sustained following full utilization of the “advances from customers and financial institutions” because there may be less incentive for resellers to sell our products.

In order to properly recognize revenue on arrangements where the reseller has duplication rights, we rely on accurate and timely reports from resellers of the quantity of licenses that have been resold or utilized. In instances where a reseller does not submit a timely report, we accrue royalty revenue through the end of the reporting period provided we have vendor specific historical information. From time to time, late or inaccurate reports are identified or corrected for a variety of reasons, including resellers updating their reports or as a result of our proactive activities such as audits of the resellers’ royalty reports. As a result, revenue from these late or updated reports, which was not previously accrued, is recognized in the period during which the reports are received. Such revenue amounted to approximately $6.0 million for 1998 and was not significant for 1999. We expect that the late or inaccurate reporting of resale or utilization of licenses by resellers and the resulting fluctuations will continue for the foreseeable future.

Our license transactions can be relatively large in size and difficult to forecast both in timing and dollar value. As a result, license transactions have caused fluctuations in net revenues and net income (loss) because of the relatively high gross margin on such revenues. As is common in the industry, a disproportionate amount of our license revenue is derived from transactions that close in the last weeks or days of a quarter. The timing of closing large license agreements also increases the risk of quarter-to-quarter fluctuations. We expect that these types of transactions and the resulting fluctuations in revenue will continue.

Service Revenues. Service revenues are comprised of maintenance, consulting and training revenues. Service revenues increased 22% to $428.7 million in 1999 and 23% to $351.6 million in 1998 from $285.7 million in 1997. Service revenues accounted for 49%, 48%, and 43% of total revenues in 1999, 1998 and 1997, respectively. The increase in service revenues, both in absolute dollars and as a percentage of total revenues, was attributable primarily to the renewal of maintenance contracts in connection with our growing installed customer base. As our products continue to grow in complexity, more support services are expected to be required. We intend to satisfy this requirement through internal support, third-party services and OEM support. Maintenance revenues increased 28% to $325.6 million for 1999 and 35% to $253.6 million for 1998 from $188.1 million for 1997. Consulting and training revenues increased 5% to $103.1 million for 1999 and remained flat at $97.9 million for 1998 as compared to $97.6 million in 1997.