BEA Systems Reports Fiscal Third Quarter Financial Results; Achieves Record Total Revenue

BEA Systems, Inc. (Nasdaq: BEAS), a world leader in enterprise infrastructure software, today announced results for its fiscal third quarter. For the third quarter ended Oct. 31, 2005, BEA reported record total revenues of $291.5 million, up 10% from $264.4 million in last year's third quarter. For the third quarter, BEA reported license revenues of $121.3 million, up 6% from $114.9 million a year ago, and services revenue of $170.2 million, up 14% from $149.5 million a year ago. For the third quarter, on a generally accepted accounting principles ("GAAP") basis, BEA reported operating income of $49.7 million, compared to $49.7 million a year ago. BEA reported GAAP third quarter net income of $37.1 million, up 11% from $33.5 million a year ago, and GAAP diluted net income per share of $0.09, up from $0.08 a year ago. BEA generated third quarter cash flow from operations of $65.4 million, up 19% from $55.1 million a year ago. BEA reported third quarter non-GAAP net income of $42.7 million, up 17% from $36.5 million a year ago, and non-GAAP diluted net income per share of $0.11, compared to $0.09 a year ago. Non-GAAP results exclude certain acquisition-related expenses, net gains or losses on investments in equity securities, facilities consolidation and other non-recurring charges. A reconciliation of non-GAAP adjustments is summarized on pages six and seven of this release. For full details on BEA's reported results, see the financial tables accompanying this release. "For the second quarter in a row, we achieved year-over-year and sequential license revenue growth in Q3. Our license revenue growth rate accelerated in Q3, and we forecast accelerated license revenue growth again in the fourth quarter," said Alfred Chuang, chairman and chief executive officer, BEA Systems, Inc. "Congratulations to the entire BEA team, and especially the Americas team, on a great quarter. The Americas team delivered our highest revenue performance ever in the Americas, and grew revenue 17% over last year, their third consecutive quarter of double digit growth. Our WebLogic Server business continued to grow faster than industry analyst projections for the app server market. In addition, contribution accelerated from our new product lines, particularly our new AquaLogic product family. We had our first multi-million dollar stand-alone order for our new AquaLogic Service Bus, and our AquaLogic product family contributed to seven out of our 19 $1 million license deals." "BEA is on the move. We are making strides in executing our focused strategy to deliver innovative and robust infrastructure software to our customers. Our product strategy includes enhancing our entire product portfolio while delivering a new product family that builds on our performance lead in the core application server market and opens opportunities for BEA in new growth markets," said Chuang. "In the core product set, we are delivering innovative new features that make it easier for customers to build, deploy and manage large-scale mission-critical systems. We are expanding the core application infrastructure into new growth areas, such as SIP support for VOIP and the triple-play opportunity in the telco market, as well as edge server technology for the RFID market. And we have built a new service infrastructure layer, the AquaLogic product family, to support SOA. To supplement our internal development, we have expanded our technology portfolio and development teams with acquisitions such as Plumtree, Compoze, ConnecTerra, M7 and SolarMetric. In addition to the talent these acquisitions have added to our technology and development teams, they have also added important new customer and partner relationships." BEA Delivers Business Results for Key Customers and Expands Partner Agreements Key customer, partner and end-user agreements signed in the quarter included Accredited Home Lenders, ADP Business Services, Agriculture Bank of China, AOL, Apoteket AB, Beijing Mobile, Blue Cross Blue Shield, China Construction Bank, China Mobile Zhejiang, China Unicom, Citigroup, Claro, Commonwealth of Massachusetts, Deutsche Bank Alex Brown, Ericsson, Far Eastone Telecom, FileNet, France Telecom, Genworth Financial, HealthNet, Kabel Deutschland Breitband Services, LG Electronics, Matson Navigation, NEC, Procter & Gamble, Samsung Electronics, Social Security Administration, Societe Generale Asset Management, United Overseas Bank Limited, U.S. Marine Corps, University of California at Los Angeles and Visage Mobile. New, renewed or expanded relationships were entered into with VARs, hardware OEMs, systems integrators, ASPs, and ISVs, including 3M, Adobe, Agile, Allbridge, AmberPoint, Aris Global, BMC Software, Borland, BusinessObjects, Carreker, CEI, Celeritas Technologies, CheckFree, Connectria, Convergys, Cubic, CyberShift, Data Storage Solutions, DataSynapse, Deltek, EMC/Documentum, Fidelity Information, First Apex, FundTech, HP Openview, iCongo, Infotrieve, Innopatch, Intec Billing, Interdynamix Systems, Interwoven, Jacada, Life Science Technologies, LSI-Lowery System, M2 Consulting, Manugistics, Manitas, Maximus, Mercury Interactive, Meridian IT Solutions, Microsoft, Motive, Myra Systems, NST, Outernet, Performance Retail, Primitive Logic, Protel Communications, RadialPoint, Quest Software, Savi, Siebel, SOROC Technology, Stele Infotech, SunGard, SupportSoft, Symantec, Syndera, TechFlow, Visiprise, Wily Technologies, WorkSuite, Xign and Zhone Technology. Legal Notice Regarding Non-GAAP Financial Information BEA provides non-GAAP expense, operating income, operating margin, net income, and net income per share data as additional information for investors. These measures are not in accordance with, or an alternative to, generally accepted accounting principles ("GAAP"), are intended to supplement GAAP financial information, and may be different than non-GAAP measures used by other companies. BEA believes that the presentation of non-GAAP, financial measures provides useful information to investors regarding our results of operations. BEA believes it also provides an alternative method of assessing our operating results that we believe is focused on our core on-going operations and may allow investors to perform additional meaningful period-to-period comparisons of our operating results. In addition, BEA's management team uses these measures for reviewing our financial results, and for budget and planning purposes. About BEA Systems, Inc. BEA Systems, Inc. is a world leader in enterprise infrastructure software, providing standards-based platforms to accelerate the secure flow of information and services. BEA product lines -- WebLogic(R), Tuxedo(R), JRockit(R) and the new AquaLogic(TM) family of Service Infrastructure -- help customers reduce IT complexity and successfully deploy Service-Oriented Architectures to improve business agility and efficiency. For more information please visit bea.com. Investors will have the opportunity to listen to BEA's earnings conference call over the Internet on the investor information page of the BEA Web site at http://www.bea.com/investors/ or through Streetevents' CompanyBoardroom site at http://www.companyboardroom.com . The Internet broadcast will be available live, and a replay will be available following completion of the live call for 365 days thereafter. In addition, investors will have the opportunity to access a telephone replay of the call through December 2, 2005, by dialing 706-645-9291, access code 2480823. NOTE: BEA, Built on BEA, Jolt, Joltbeans, Steelthread, Top End, Tuxedo, BEA WebLogic Server, BEA JRockit, BEA Liquid Data for WebLogic, and WebLogic are registered trademarks of BEA Systems, Inc. BEA AquaLogic, BEA AquaLogic Data Services Platform, BEA AquaLogic Enterprise Security, BEA AquaLogic Service Bus, BEA dev2dev Subscriptions, BEA eLink, BEA MessageQ, BEA WebLogic Communications Platform, BEA WebLogic Enterprise, BEA WebLogic Enterprise Platform, BEA WebLogic Enterprise Security, BEA WebLogic Express, BEA WebLogic Integration, BEA WebLogic Java Adapter for Mainframe, BEA WebLogic JDriver, BEA WebLogic Log Central, BEA WebLogic Network Gatekeeper, BEA WebLogic Platform, BEA WebLogic Portal, BEA WebLogic SIP Server, BEA WebLogic WorkGroup Edition, and BEA WebLogic Workshop, are trademarks of BEA Systems, Inc. BEA Mission Critical Support is a service mark of BEA Systems, Inc. All other company and product names may be the subject of intellectual property rights reserved by third parties. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the statement regarding (i) a forecast for fourth quarter accelerated growth, (ii) enhancement of the BEA product portfolio, (iii) delivery of a new BEA product family, (iv) an increase in BEA's performance lead in the core application server market, (v) expanding opportunities for BEA in new growth markets, (vi) continued delivery of innovative new features in the core product set that make it easier for customers to build, deploy and manage large-scale mission- critical systems, and (vii) expanding the core application infrastructure into new growth areas, as well as other matters discussed in this new release that are not purely historical data. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Such risks and uncertainties include, but are not limited to, risks associated with: quarterly fluctuations in customer spending due to economic, geopolitical, competitive and other factors; dependence on the growth of the markets for BEA's products, especially the markets for SOA, service infrastructure, VOIP, telecommunications, and RFID software; changes in the standards or technologies used in the SOA, telecommunications and portal markets that could render our products less competitive; any decline in spending by the telecommunications industry as a result of consolidation or adverse economic conditions; our dependence on large transactions, particularly those received at the end of our quarter; dependence on new product introductions and enhancements; the introduction by competitors of new products and pricing strategies; market acceptance of BEA's enhanced product portfolio; the length of BEA's sales cycle; the dependence on acceptance of BEA's products by channel partners; dependence on the success of BEA's channel partners; dependence on retaining and hiring key personnel; rapid technological change; the integration of new technology and personnel as a result of acquisitions; potential software defects (particularly with regard to newly introduced and planned products, such as those related to BEA WebLogic Communications Platform); significant leverage and debt service requirements; and any other risks indicated in our filings with the Securities and Exchange Commission (SEC). For more details, please refer to our SEC filings, including our Annual Report on Form 10-K for the year ended January 31, 2005, our Quarterly Report on Form 10-Q for the quarters ended April 30, 2005 and July 31, 2005, and our Current Reports on Form 8-K, as well as similar disclosures in subsequent BEA SEC filings. The forward-looking statements and risks stated in this press release are based on information available to BEA today. BEA assumes no obligation to update them. BEA SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per share data) Three Months Ended Nine Months Ende ctober 31, October 31, 2005 2004 2005 2004 Revenues: License fees $121,323 $114,914 $355,693 $351,366 Services 170,200 149,485 502,708 437,956 Total revenues291,523 264,399 858,401 789,322 Cost of revenues: Cost of license fees 9,6499,413 24,680 28,545 Cost of services 50,077 47,886 157,552 143,796 Total cost of revenues 59,726 57,299 182,232 172,341 Gross profit 231,797 207,100 676,169 616,981 Operating expenses: Sales and marketing 104,684 96,868 316,007 297,167 Research and development 46,306 37,007 128,721 108,423 General and administrative 26,461 23,500 78,733 67,386 Facilities consolidation -- -- --8,165 Acquisition-related in process research and development 4,600 --4,600 -- Total operating expenses182,051 157,375 528,061 481,141 Income from operations 49,746 49,725 148,108 135,840Interest and other, net 5,284 (1,859) 7,212 (8,108)Income before provision for income taxes 55,030 47,866 155,320 127,732 Provision for income taxes 17,890 14,360 47,977 38,320Net income $37,140 $33,506 $107,343 $89,412 Net income per share: Basic $0.10$0.08$0.27$0.22 Diluted $0.09$0.08$0.27$0.21 Shares used in computing net income per share: Basic 385,850 404,690 390,593 407,667 Diluted 394,850 411,100 398,907 418,113 BEA SYSTEMS, INC.NON-GAAP STATEMENTS OF OPERATION MPACT OF NON-GAAP ADJUSTMENTS ON REPORTED NET INCOME (In thousands, except for per share data) (unaudited) For the Three Months Ended October 31, 2005 AsAdjust- A eported ments Adjusted Revenues$291,523$-- $291,523 Cost of revenues 59,726 (2,437) (a) 57,289 Gross profit 231,797 2,437 234,234 Operating expenses 182,051 (5,272) (b) (c) 176,779 Income from operations 49,746 7,709 57,455 Interest and other, net 5,284 1,691 (d) 3,593 Income before provision for income taxes 55,030 6,018 61,048 Provision for income taxes 17,890424 (e) 18,314 Net income $37,140 $5,594 $42,734 Net income per share $0.09 $0.11 Diluted shares outstanding 394,850394,850 For the Three Months Ended October 31, 2004 As Adjust- A eported mentsAdjusted Revenues$264,399$-- $264,399 Cost of revenues 57,299 (3,099) (a) 54,200 Gross profit 207,100 3,099 210,199 Operating expenses 157,375 (1,139) (b) (c) 156,236 Income from operations 49,725 4,238 53,963 Interest and other, net (1,859)-- (d) (1,859) Income before provision for income taxes 47,866 4,238 52,104 Provision for income taxes 14,360 1,271 (e) 15,631 Net income $33,506 $2,967 $36,473 Net income per share $0.08 $0.09 Diluted shares outstanding 411,100411,100 (a) Non-GAAP cost of revenues exclude $2,437 and $3,099 related to impairment and amortization of acquired intangible assets for the three months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude amortization of intangibles, deferred compensation and other acquisition related expenses because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the post-acquisition. Management also believes excluding these items facilitates comparisons to BEA's historical and competitors' core operating results during periods when there were no acquisitions. (b) Non-GAAP operating expenses exclude $672 and $1,139 related to acquisition-related deferred compensation expense for the three months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude amortization of intangibles, deferred compensation and other acquisition related expenses because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the post-acquisition. Management also believes excluding these items facilitates comparisons to BEA's historical and competitors' core operating results during periods when there were no acquisitions. (c) Non-GAAP operating expenses also exclude $4,600 and $0 related to acquisition-related in-process research and development for the three months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude acquisition-related in-process research and development because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the post-acquisition. (d) Non-GAAP interest and other, net excludes the net gain of $1,691 and $0 related to a minority interest in equity securities for the three months ended October 31, 2005 and 2004, respectively. The net gain represents a return of investment in minority interest in an equity security that had been written off due to impairment in a prior fiscal year. Management believes it is useful in measuring BEA's operations to exclude the gain on the minority interest in equity securities because this gain is not part of the company's operations but instead is a non-operating gain that is included in other income and is part of BEA's investment activities. (e) Provision for income taxes assumes a tax rate of 30 percent and includes the impact of these non-GAAP adjustments. BEA SYSTEMS, INC.NON-GAAP STATEMENTS OF OPERATION MPACT OF NON-GAAP ADJUSTMENTS ON REPORTED NET INCOME (In thousands, except for per share data) (unaudited) For the Nine Months Ended October 31, 2005 AsAdjust- A eported ments Adjusted Revenues$858,401$-- $858,401 Cost of revenues 182,232 (6,548) (a)175,684 Gross profit 676,169 6,548 682,717 Operating expenses 528,061 (5,896) (b) (c)(d)522,165 Income from operations 148,108 12,444 160,552 Interest and other, net 7,212 1,691 (e) 5,521 Income before provision for income taxes 155,320 10,753 166,073 Provision for income taxes 47,977 1,844 (f) 49,821 Net income $107,343 $8,909 $116,252 Net income per share $0.27 $0.29 Diluted shares outstanding 398,907398,907 For the Nine Months Ended October 31, 2004 As Adjust- A eported mentsAdjusted Revenues$789,322 $--$789,322 Cost of revenues 172,341 (9,426) (a)162,915 Gross profit 616,981 9,426 626,407 Operating expenses 481,141 (10,542)(b) (c)(d)470,599 Income from operations 135,840 19,968 155,808 Interest and other, net (8,108) -- (e) (8,108) Income before provision for income taxes 127,732 19,968 147,700 Provision for income taxes 38,320 5,988 (f) 44,308 Net income $89,412 $13,980$103,392 Net income per share $0.21 $0.25 Diluted shares outstanding 418,113418,113 (a) Non-GAAP cost of revenues exclude $6,548 and $9,426 related to impairment and amortization of acquired intangible assets for the nine months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude amortization of intangibles, deferred stock compensation and other acquisition related expenses because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the post-acquisition. Management also believes excluding these items facilitates comparisons to BEA's historical and competitors' core operating results during periods when there were no acquisitions. (b) Non-GAAP operating expenses exclude $1,296 and $2,377 related to acquisition-related deferred compensation expense for the nine months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude amortization of intangibles, deferred stock compensation and other acquisition related expenses because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the post-acquisition. Management also believes excluding these items facilitates comparisons to BEA's historical and competitors' core operating results during periods when there were no acquisitions. (c) Non-GAAP operating expenses also exclude $0 and $8,165 related to facilities consolidation for the nine months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude expenses related to facilities consolidation because the companies restructuring activities have been non-recurring and infrequent and therefore may not be considered directly related to our on-going core business operations. (d) Non-GAAP operating expenses also exclude $4,600 and $0 related to acquisition-related in-process research and development for the nine months ended October 31, 2005 and 2004, respectively. Management believes it is useful in measuring BEA's operations to exclude acquisition-related in-process research and development because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the post-acquisition. (e) Non-GAAP interest and other, net excludes the net gain of $1,691 and $0 related to a minority interest in equity securities for the nine months ended October 31, 2005 and 2004, respectively. The net gain represents a return of investment in minority interest in an equity security that had been written off due to impairment in a prior fiscal year. Management believes it is useful in measuring BEA's operations to exclude the gain on the minority interest in equity securities because this gain is not part of the company's operations but instead is a non-operating gain that is included in other income and is part of BEA's investment activities. (f) Provision for income taxes assumes a tax rate of 30 percent and includes the impact of these non-GAAP adjustments. BEA SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands) October 31,January 31, 2005 2005 (unaudited) (*) ASSETS Current assets: Cash and cash equivalents $894,093$777,754 Restricted cash 1,984 1,648 Short-term investments 549,851 830,063 Accounts receivable, net 250,121 258,655 Other current assets 53,056 44,077 Total current assets 1,749,105 1,912,197 Property and equipment, net347,565 347,571 Acquired intangible assets, net 247,160 71,305 Long-term restricted cash 2,644 4,130 Other long-term assets 22,334 13,191 $2,368,808 $2,348,394 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrue iabilities $246,773$219,422 Deferred revenues 303,106 312,310 Current portion of notes payabl nd other obligations 581459 Total current liabilities 550,460 532,191 Notes payable and other long-term obligations238,870 233,036 Convertible subordinated notes 550,000 550,000 Stockholders' equity: Common stock 1,282,732 1,202,124 Retained earnings 219,398 112,055 Deferred compensation (10,786) (8,874) Treasury stock(464,579) (284,551) Accumulated other comprehensiv ncome2,713 12,413 Total stockholders' equity1,029,478 1,033,167 $2,368,808 $2,348,394 (*) Derived from audited consolidated financial statements.

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