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BEA Systems, Inc. Reports Second Quarter Results


Customer Adoption of Service-Oriented Architecture
and AquaLogic Drive 15% Year-over-Year License Revenue Growth

SAN JOSE, Calif.—August 16, 2006— BEA Systems, Inc. (NASDAQ: BEAS), a world leader in enterprise infrastructure software, today announced financial results for the fiscal second quarter ended July 31, 2006. BEA reported second quarter total revenues of $339.6 million, up 19% from last year’s second quarter. BEA reported second quarter license fees of $136.0 million, up 15% from a year ago, and services revenue of $203.6 million, up 22% from a year ago. BEA reported second quarter operating cash flow of $49.9 million, up 22% from a year ago.

For the second quarter, on a generally accepted accounting principles (“GAAP”) basis, BEA reported operating profit of $40.8 million, compared to $49.9 million a year ago. BEA reported GAAP second quarter net income of $36.3 million, compared to $36.1 million a year ago, and GAAP diluted net income per share of $0.09 compared to $0.09 a year ago. BEA’s GAAP results for the second quarter of fiscal 2007 were affected by the adoption of FAS 123R regarding expensing of employee stock options.

BEA reported second quarter non-GAAP operating income of $68.2 million, up 31% from $52.1 million a year ago. BEA reported second quarter non-GAAP net income of $56.1 million, up 49% from $37.7 million a year ago, and non-GAAP diluted net income per share of $0.14, compared to $0.09 a year ago. Non-GAAP results exclude certain acquisition-related expenses, employee stock option expenses, net gains or losses on investments in equity securities, net gains on repurchases of debt, facilities consolidation charges, and other charges and credits that are expected to be non-recurring, and reflects a tax rate of 27%, which includes the impact of the excluded items. A reconciliation of non-GAAP adjustments to our GAAP financial measures is presented on page seven of this release. For full details on BEA’s reported results, see the financial tables accompanying this release.

“Service-Oriented Architecture is going to be the dominant architecture for the next generation of enterprise IT systems. BEA is ideally positioned to take advantage of the momentum behind SOA-led projects, with the industry’s leading SOA platform of products and services,” said Alfred Chuang, chairman and chief executive officer, BEA Systems, Inc. “AquaLogic and BEA’s SOA services continue to drive new customer opportunities.”

“BEA performed well by several measures this quarter,” Chuang said. “We signed 17 $1 million and above license deals. AquaLogic exceeded 20% of our license revenue this quarter, with a good balance between organic growth and acquisitions. Our core WebLogic Server business remained solid, and WebLogic Server was acknowledged as the leader in software revenues in its market. Our rapid growth in China continued, and we remain excited about our prospects in that key region. In addition, we exceeded our operating margin goals, which is a key focus this year.”

BEA Delivers Business Results for Key Customers and Expands Partnerships

Key customer, partner and end-user agreements signed in the quarter included Abbey National, Babcock & Wilcox, Boehringer Ingelheim, Broadlane, Bureau of Alcohol Tobacco and Firearms, CARFAX, CGI Group, China Construction Bank, China Foreign Exchange Trade System, China Mobile, China Network Communications Group, China Post, China State Power, China Telecom, Chubb Insurance, Citibank, Consumer Source, Department of Homeland Security, Enterprise Rent a Car, Ericsson Australia, Fannie Mae, GE Healthcare, General Mills, HBO-Time Warner, Houghton Mifflin, Hyundai Motor, ICON Clinical Research, IHC Health Services, Land O’ Lakes, Land Rover, Medtronic, Mercy Health Services, Merrill Lynch, Mortgage Lenders Network, Mount Sinai School of Medicine, Network Appliance, O2 Germany, Oppenheimer Funds, Pacific Gas & Electric, Payless ShoeSource, Pfizer, Pratt & Whitney, Samsung, Seagate Technology, Singapore Polytechnic, Sirius Satellite Radio, State of Maine, Supreme Court of Louisiana, Tata Consultancy Services, Tufts Associated Health Plans, VISA Europe Services, and Wipro Limited.

New, renewed or expanded relationships were entered into with VARs, hardware OEMs, systems integrators, ASPs and ISVs, including 3t Systems, Alliance Technologies, Checkfree, CompuCom Systems, GroupIT, Groupware Technology, Integra5, Intuit, IPUnity, Leapstone, McElroy Technology Partners, Micro System Enterprises, ProKarma, Razorsight Corporation, Technology Group Solutions, and Telenity.

Internal Review of Stock Option Grants

BEA also announced today that the Audit Committee of its Board of Directors has commenced an internal review of BEA’s historical stock option grants. This internal review will be assisted by independent legal counsel. Facts may come to light once the review is completed that may require us to change our accounting treatment of stock options granted in prior periods, which may or may not have a material adverse effect on our results of operations for those periods or other periods.

GAAP to Non-GAAP Reconciliation

This release includes non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per share data. These non-GAAP measures are not in accordance with, or an alternative to, generally accepted accounting principles (“GAAP”) and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the items associated with BEA’s results of operations as determined in accordance with GAAP and these measures should only be used to evaluate BEA’s results of operations in conjunction with the corresponding GAAP measures.

Non-GAAP operating income consists of GAAP operating income excluding, as applicable, acquisition-related intangible asset amortization, acquisition-related deferred compensation, acquisition-related in-process research and development, FAS123R expense and restructuring charges (including facilities consolidations). Non-GAAP net income consists of non-GAAP operating income and excludes, as applicable, net gains on minority interests in equity investments and net gains on retirement of convertible subordinated notes. Non-GAAP net income is adjusted by the amount of additional taxes or tax benefit that BEA would accrue if it used non-GAAP results instead of GAAP results to calculate BEA’s tax liability. BEA may consider whether or not other items that arise in the future should also be adjusted from the non-GAAP financial measures reported.

Management believes it is useful in measuring BEA’s core continuing operations to exclude acquisition-related intangible asset amortization, acquisition-related deferred compensation expense and acquisition-related in-process research and development expense because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management. In addition, management believes it is useful to exclude FAS123R expense because it enhances investors’ ability to review BEA’s business from the same perspective as BEA management, who believes that FAS123R expense is not directly attributable to the underlying performance of BEA’s core continuing operations since it is a non-cash charge. Management also believes it is useful to exclude gains on minority interest in equity investments and gains on retirement of convertible subordinated notes since these are not direct results from core continuing operations and, in the case of the minority interest in equity investments, are not under the control of BEA. The foregoing items excluded from BEA’s non-GAAP operations are consistently excluded by BEA’s management for internal planning and forecasting purposes as well as employee compensation decisions.

BEA believes that presenting its non-GAAP measures of operating income, net income and diluted net income per share provides investors with an additional tool for evaluating the performance of BEA’s business, which management uses in its own evaluation of performance, and an additional base line for assessing the future earnings potential of BEA. While GAAP results are more complete, BEA believes it is valuable to allow investors to have this supplemental measure, with reconciliation to GAAP, since it may provide additional insight into our financial results.
About BEA

BEA Systems, Inc. (NASDAQ: BEAS) 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®, Tuxedo®, and the new AquaLogic™ 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


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 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 July 1, 2006, by dialing (706) 645-9291, access code 8476151.

Copyright © 2006 BEA Systems, Inc. All rights reserved. BEA, Built on BEA, Jolt, Joltbeans, Steelthread, Top End, Tuxedo, BEA WebLogic Server, 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 statements regarding BEA’s position to take advantage of the momentum behind SOA-led projects, future adoption of SOA, future operating leverage, and the value of our presentation of non-GAAP financial measures to investors. 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 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; declines in spending by the telecommunications industry as a result of consolidation or adverse economic conditions; our dependence on large transactions, particularly those consummated 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; BEA’s ability to integrate new technology and personnel as a result of acquisitions; the length of BEA’s sales cycle; the acceptance of BEA’s products by channel partners; the success of BEA’s channel partners; rapid technological change; potential software defects (particularly with regard to newly introduced and planned products, such as those related to BEA WebLogic Communications Platform); BEA’s ability to retain and hire key personnel; misinterpretations resulting from the provision of non-GAAP financial information; significant leverage and debt service requirements; and 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 of Form 10-K for the fiscal year ended January 31, 2006, and our Current Reports on Form 8 K, as well as similar disclosures in subsequent 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.


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