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Morningstar® Document Research℠
FORM 10-K
ORACLE CORP - ORCL
Filed: July 21, 2006 (period: May 31, 2006)
Annual report with a comprehensive overview of the company

Table of contents

  • Page 1
    Morningstar Document Research ® ℠FORM 10-K ORACLE CORP - ORCL Filed: July 21, 2006 (period: May 31, 2006) Annual report with a comprehensive overview of the company

  • Page 2
    ...(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 000-51788 (Exact name of registrant as specified in its charter) Oracle Corporation (State or other jurisdiction of incorporation or organization) Delaware (Address of principal executive offices, including zip code) (Registrant...

  • Page 3
    ...Accounting and Financial Disclosure Controls and Procedures Other Information Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Submission of Matters to a Vote of Security Holders Page 1 12 19 19 19 19 20 21 22 53 56 56 56 58 58 58 58 59 59 59 103 Source: ORACLE CORP...

  • Page 4
    ...Form 10-Q to be filed by us in our 2007 fiscal year, which runs from June 1, 2006 to May 31, 2007. PART I Item 1. Business General We are the world's largest enterprise software company. We develop, manufacture, market, distribute and service database and middleware software as well as applications...

  • Page 5
    ... any industry or application. Oracle technology operates on single server or clustered server configurations, and supports a choice of operating systems including Linux, UNIX and Windows. New software license revenues include fees earned from granting customers licenses to use our software products...

  • Page 6
    ... Search indexes and searches public, private and shared content across internal and external web sites, databases, file servers, document repositories, enterprise content management systems, applications and portals. Oracle Secure Enterprise Search has built-in functionality that permits users...

  • Page 7
    ... testing enterprise-class J2EE applications and web services. In addition, the suite contains Oracle Designer, a tool that allows developers to model business processes and automatically generate enterprise database applications, and Oracle Forms Developer, a development tool for building database...

  • Page 8
    ... set of service infrastructure components for creating, deploying, and managing SOA's, including Oracle Developer 10g, Oracle BPEL Process Manager, Oracle Web Services Manager, Oracle Business Rules Engine, Oracle Business Activity Monitoring, and Oracle Enterprise Service Bus. Oracle SOA Suite...

  • Page 9
    ... contracts annually. Software license updates and product support revenues represented 46%, 45% and 44% of total revenues in fiscal 2006, 2005 and 2004, respectively. Services Business Consulting Oracle Consulting assists customers in accessing the business value in our applications and technology...

  • Page 10
    ... the database administrator, internet developer and applications suite user communities. We provide applications, technology, education and technical support that enable our partners to effectively integrate our products into their business offerings. The combination of Oracle's infrastructure and...

  • Page 11
    ... tools and identity management), collaboration, development tools, enterprise applications and consulting/systems integration, among others. Total cost of ownership, performance, functionality, ease of use, standards-compliance, product reliability, security and quality of technical support are key...

  • Page 12
    ... business acquisitions. We also purchase or license intellectual property rights in certain circumstances. Internal development allows us to maintain technical control over the design and development of our products. We have a number of United States and foreign patents and pending applications...

  • Page 13
    ... Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations web site at www.oracle.com/investor...

  • Page 14
    ... joining Oracle, he served as Senior Vice President, Public Sector, Customer Solutions Group at Hewlett-Packard Company ("HP"), from December 2003 to September 2004, where he was responsible for HP's worldwide Public Sector, Health and Education business. Mr. Rottler was Vice President, HP Services...

  • Page 15
    ...license updates and product support. In addition, standards for network protocols, as well as other industry adopted and de facto standards for the internet, are rapidly evolving. We cannot provide any assurance that the 12 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 16
    ... than it is worth; • we may not realize the anticipated increase in our revenues if a larger than predicted number of customers decline to renew software license updates and product support, if we are unable to sell the acquired products to our customer base or if acquired contract models do not...

  • Page 17
    ...business actions for a fixed period of time subsequent to the acquisition. The payment obligation, which typically expires four years from the date of the contract, is fixed at an amount generally between two and five times the license and first year support fees paid to PeopleSoft in the applicable...

  • Page 18
    ... pricing models. We may be unable to compete effectively in a range of markets within the highly competitive software industry. Many vendors develop and market databases, internet application server products, application development tools, business applications, collaboration products and business...

  • Page 19
    ... affect our operating results. Under purchase accounting, we allocate the total purchase price to an acquired company's net tangible assets, amortizable intangible assets and in-process research and development based on their fair values as of the date of the acquisition and record the excess of the...

  • Page 20
    ... services for our applications and database technology, delivered either at Oracle or at a customer designated location. Oracle On Demand also includes several product lines we have acquired. Our Oracle On Demand business model continues to evolve and we may not be able to compete effectively...

  • Page 21
    ... tax determination is uncertain. We are regularly under audit by tax authorities. Our intercompany transfer pricing is currently being reviewed by the IRS and by foreign tax jurisdictions and will likely be subject 18 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 22
    ... set forth in Note 21 of Notes to Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K is incorporated herein by reference. Item 4. None. Submission of Matters to a Vote of Security Holders 19 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 23
    ..., to employees of Oracle EMEA Limited who are not "U.S. Persons" as that term is defined in Regulation S. Stock Repurchase Programs In 1992, our Board of Directors approved a program to repurchase shares of our common stock to reduce the dilutive effect of our stock option and stock purchase plans...

  • Page 24
    ... using the closing price of our common stock as of May 31, 2006. In July 2006, the Board increased the authorization for the repurchase program such that $4.0 billion is now available for repurchase under the program. Item 6. Selected Financial Data The following table sets forth selected financial...

  • Page 25
    ... of companies acquired (2) the renewal rate of the support contract base, (3) the amount of new support contracts sold in connection with the sale of new software licenses and (4) inflationary support price increases. 22 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 26
    ... use of outsourcing solutions. Despite these trends, we expect education revenues to increase in fiscal 2007, primarily due to an increase in customer training on the use of our acquired application products. 23 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 27
    ... to aid in fully understanding and evaluating our reported financial results include the following: • Business Combinations • PeopleSoft Customer Assurance Program • Goodwill • Revenue Recognition 24 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Researchâ„

  • Page 28
    ... higher than what we have recorded and we would have recorded a higher amount of software license updates and product support revenue historically and in future periods related to these assumed contracts. 25 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Researchâ„

  • Page 29
    ... plans associated with pre-merger activities of the companies we acquire are recorded as an adjustment to goodwill indefinitely, whereas increases to the estimates are recorded as an adjustment to goodwill during the purchase price allocation period (generally within one year of the acquisition date...

  • Page 30
    ...includes new software license and software license updates and product support revenues, and (2) services, which include consulting, On Demand and education revenues. New software license revenues represent fees earned from granting customers licenses to use our database, middleware and applications...

  • Page 31
    ... performance analysis, personalized support and annual on-site technical services. Revenues from On Demand services are recognized over the term of the service contract, which is generally one year. Education revenues include instructor-led, media-based and internet-based training in the use of our...

  • Page 32
    ...such determination is made. Our effective tax rate includes the impact of certain undistributed foreign earnings for which no U.S. taxes have been provided because such earnings are planned to be indefinitely reinvested outside the United States. 29 Source: ORACLE CORP, 10-K, July 21, 2006 Powered...

  • Page 33
    ... of these identified intangibles among different taxing jurisdictions, including those with nominal or zero percent tax rates, in establishing the related deferred tax liabilities. Income tax contingencies existing as of the acquisition dates of the acquired companies are evaluated quarterly and any...

  • Page 34
    ... effects of adopting Statement 123(R) will depend on numerous factors including the amounts of share-based payments granted in the future, the valuation model we use to value future share-based payments to employees and estimated forfeiture rates. We estimate that stock-based compensation expense...

  • Page 35
    ...of PeopleSoft, Siebel and Retek products to growth in new software license revenues, the amount of revenues associated with PeopleSoft and Siebel software license updates and product support and On Demand services and present supplemental disclosure related to acquisition accounting where applicable...

  • Page 36
    ...2006 due to strong sales execution, incremental revenues from acquisitions and a strengthening in our competitive position. Excluding the effect of currency rate fluctuations, software license updates and product support revenues contributed 50% to the growth in total revenues, new software licenses...

  • Page 37
    ... the fair value of support obligations assumed in connection with business acquisitions made during fiscal 2005 and fiscal 2006. Due to our application of business combination accounting rules, software license updates and product support revenues related to support contracts in the amount of...

  • Page 38
    ... (5) Sales and marketing Software license updates and product support Cost of services Research and development Acquisition related charges Total $ 8 3 7 13 18 $ 49 2006 $ 6 2 7 10 47 $ 72 2004 Stock-based compensation included in acquisition related charges resulted from unvested options...

  • Page 39
    Table of Contents Software Software includes new software licenses and software license updates and product support. New Software Licenses: New software license revenues represent fees earned from granting customers licenses to use our database, middleware and application software products. We ...

  • Page 40
    ... with increased sales headcount. The total new software license margin as a percentage of revenues was negatively affected as a result of higher personnel related expenditures and amortization of intangible assets. 37 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 41
    ...associated with new software license revenues recognized over the past fiscal year. Software license updates and product support revenues in fiscal 2006 include incremental revenues of $797 million from PeopleSoft contracts and $90 million from Siebel contracts. Excluding the effect of currency rate...

  • Page 42
    ... the revenue for the full value of the contracts over the support periods, the majority of which are one year. Software license updates and product support expenses increased primarily due to higher salary and benefits associated with increased headcount to support the expansion of our customer base...

  • Page 43
    ... resources acquired from acquisitions and increased external contractor costs due to employee attrition. The total consulting margin as a percentage of revenues was negatively affected as a result of additional consulting expenses attributed to headcount levels and external contractor related...

  • Page 44
    ... Demand and Advanced Customer Services businesses as a result of additional resources acquired from Siebel as well as higher computer and technology related charges and external contractor costs in our Oracle On Demand business. The total On Demand margin as a percentage of revenues declined due to...

  • Page 45
    ... headcount and associated personnel related expenditures related to Siebel education employees and higher external contractor costs. Fiscal 2005 Compared to Fiscal 2004: Education revenues increased due to revenues related to PeopleSoft. Excluding the effect of currency rate fluctuations, the...

  • Page 46
    ... bonuses and benefit expenses. Amortization of Intangible Assets: Year Ended May 31, Change 2005 Change Average Useful Life (Dollars in millions) 2006 2004 Software support agreements and related relationships Developed technology Core technology Customer contracts Trademarks Total amortization...

  • Page 47
    ... to in-process research and development charges, transitional employee related costs and stock-based compensation charges associated with the PeopleSoft acquisition. In addition, professional fees, which primarily relates to tender offer costs for PeopleSoft prior to the agreement date, increased in...

  • Page 48
    ... benefit from certain non-recurring tax events in fiscal 2006 that occurred in fiscal 2005, as described below, and we incurred higher non-deductible in-process research and development charges in fiscal 2006. 45 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 49
    ... by dividing period end accounts receivable by average daily sales for the quarter, was 55 at May 31, 2006 compared with 56 days at May 31, 2005. The days sales outstanding calculation excludes the adjustment to reduce software license updates and product support revenue related to adjusting...

  • Page 50
    ... and product support revenues are generally billed one year in advance, while the revenues are recognized ratably over the annual contract period. Software license updates and product support revenues as a percent of total revenues increased, resulting in higher cash collections and lower days sales...

  • Page 51
    ...to have surrendered control of these financial assets. In fiscal 2006, 2005 and 2004, $618 million, $456 million and $357 million or approximately 13%, 11% and 10%, respectively, of our new software license revenues were financed through our financing division. 48 Source: ORACLE CORP, 10-K, July 21...

  • Page 52
    ...% senior notes due January 2016, net of discount of $11 6.91% senior notes due February 2007 (effective interest rate of 7.30%) Other Total $ Principal Balance $ 1,500 2,242 1,989 150 6 5,887 Interest payments were calculated based on terms of the related agreements and include estimates based...

  • Page 53
    ... senior notes) to finance the Siebel acquisition and for general corporate purposes. On June 16, 2006, we completed a registered exchange offer for the original senior notes to permit holders to freely transfer their senior notes, which have substantially identical terms to the original senior notes...

  • Page 54
    ... stock option grants in excess of 25,000 shares. A separate Plan Committee, which is an executive officer committee, approves individual stock option grants up to 25,000 shares to non-executive officers and employees. 51 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 55
    ... will reduce net operating cash flows and increase net financing cash flows in periods after adoption. Total cash flow will remain unchanged from what would have been reported under prior accounting rules. 52 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Researchâ„

  • Page 56
    ... effects of adopting Statement 123(R) will depend on numerous factors including the amounts of share-based payments granted in the future, the valuation model we use to value future share-based payments to employees and estimated forfeiture rates. We estimate that stock-based compensation expense...

  • Page 57
    ... into an interest-rate swap agreement that has the economic effect of modifying the interest obligations associated with our 6.91% senior notes so that the interest payable on the senior notes effectively becomes variable based on the three month LIBOR set quarterly until maturity. Foreign Currency...

  • Page 58
    ... exchange rates are quoted using market conventions where the currency is expressed in currency units per United States dollar. All of our forward contracts mature in 90 days or less as of May 31, 2006. Table of Forward Contracts: United States Dollar Foreign Exchange Contracts Exchange Foreign...

  • Page 59
    ... in our financial statements and better manages interest rate differentials between different countries. Under this method, the change in fair value of the forward contract attributable to the changes in spot exchange rates (the effective portion) is reported in stockholders' equity to offset...

  • Page 60
    .... Management's assessment of the effectiveness of our internal control over financial reporting as of May 31, 2006 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Part IV, Item 15 of this Annual Report on Form 10...

  • Page 61
    ... Rights." This number includes 87,201,428 shares available for future issuance under the Oracle Corporation Employee Stock Purchase Plan (1992). These options were assumed in connection with our acquisitions in fiscal 2005 and fiscal 2006. No additional awards were or can be granted under the plans...

  • Page 62
    ...filed with the SEC (the original Exhibit number is referenced parenthetically). Exhibit Number Exhibit Title 2.01 (1) Agreement and Plan of Merger dated as of September 12, 2005, as amended, by and among Oracle Systems Corporation (formerly named Oracle Corporation), Siebel Systems, Inc., Oracle...

  • Page 63
    ...N.A. (10.35) Forms of New Floating Rate Note due 2009, New 5.00% Note due 2011 and New 5.25% Note due 2016 (4.4) Registration Rights Agreement dated as of January 13, 2006 among Oracle Systems Corporation, Oracle Corporation and Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Wachovia...

  • Page 64
    ... reference to Oracle Systems Corporation's Current Report on Form 8-K filed on September 9, 2005 Incorporated by reference to Oracle Systems Corporation's Current Report on Form 8-K filed on November 9, 2005 61 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Researchâ„

  • Page 65
    ...in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Oracle Corporation's internal control over financial reporting as of May 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of...

  • Page 66
    ... of the Public Company Accounting Oversight Board (United States), the 2006 consolidated financial statements of Oracle Corporation and our report dated July 20, 2006 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP San Francisco, California July 20, 2006 63 Source: ORACLE CORP, 10...

  • Page 67
    ...,687 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt Accounts payable Income taxes payable Accrued compensation and related benefits Accrued restructuring Deferred revenues Other current liabilities Total current liabilities Non...

  • Page 68
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended May 31, 2006, 2005 and 2004 Year Ended May 31, 2005 (in millions, except per share data) Revenues: New software licenses Software license updates and product support Software revenues Services Total ...

  • Page 69
    ...2003 Common stock issued under stock option plans Common stock issued under stock purchase plan Repurchase of common stock Tax benefits from stock plans Foreign currency translation Net equity hedge loss Reversal of unrealized gain on equity securities Unrealized gain on equity securities Net income...

  • Page 70
    ... restructuring In-process research and development Net investment gains related to equity securities Changes in assets and liabilities, net of effects from acquisitions: Increase in trade receivables Decrease (increase) in prepaid expenses and other assets Increase (decrease) in accounts payable and...

  • Page 71
    ...31, 2006 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Oracle Corporation develops, manufactures, markets, distributes and services database, middleware and applications software that helps organizations manage and grow their businesses. Database and middleware software is used for developing...

  • Page 72
    ... normal pricing and discounting practices for those products and services when sold separately and for software license updates and product support services based upon the renewal rate offered to the customer. 69 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 73
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2006 We defer revenue for any undelivered elements, and recognize revenue when the product is delivered or over the period in which the service is performed, in accordance with our revenue ...

  • Page 74
    ... the short duration of our payment terms and by the diversification of our customer base. Other Receivables Other receivables represents value-added tax and sales tax receivables associated with the sale of software and services to third parties. Marketable Equity Securities and Other Investments In...

  • Page 75
    ... attribution method over the vesting period, typically four years, and the estimated fair value of the stock purchases is amortized over the six-month purchase period. The following table illustrates the effect 72 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 76
    ... stock purchase plans under the fair value method of accounting: Year Ended May 31, 2005 (in millions, except per share data) Net income, as reported Add: Employee compensation expense included in net income, net of related tax effects Deduct: Stock-based employee compensation expense determined...

  • Page 77
    ...for all share-based payments granted after the effective date of adoption and (b) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of adoption that remain unvested on the date of adoption. 74 Source: ORACLE CORP, 10-K, July 21, 2006 Powered...

  • Page 78
    ...2. ACQUISITIONS Fiscal 2006 Acquisitions Siebel Systems, Inc. On January 31, 2006 (Acquisition Date), we completed our acquisition of Siebel pursuant to our Merger Agreement dated September 12, 2005. We acquired Siebel to expand our presence in the customer relationship management (CRM) applications...

  • Page 79
    ... and marketable securities Trade receivables Goodwill Intangible assets Deferred tax assets, net Other assets Accounts payable and other liabilities Restructuring (see Note 3) Deferred revenues Deferred stock-based compensation In-process research and development Total purchase price 76 $ $ 2,362...

  • Page 80
    ... invested capital. The following table sets forth the components of intangible assets associated with the acquisition: (Dollars in millions) Fair Value Useful Life Software support agreements and related relationships Developed technology Core technology Customer relationships Trademarks and other...

  • Page 81
    ...million, or a weighted average price of 1,334 Indian rupees per share. We own approximately 52.5% of i-flex common stock as of May 31, 2006. We currently account for our investment in i-flex under the equity method of accounting two months in arrears as our reporting periods differ and the access to...

  • Page 82
    .... The pro forma financial information for all periods presented also includes the business combination accounting effect on historical PeopleSoft and Siebel support revenues, the charge for IPR&D, amortization charges from acquired intangible assets, stock-based compensation charges for unvested...

  • Page 83
    ... to by management. We completed the substantial majority of our planned legal-entity mergers, information system conversions and integration of Siebel's operations in the fourth quarter of fiscal 2006 and expect to finalize all other planned integration activities in the next three months. The total...

  • Page 84
    ...(3) Payments Accrued May 31, 2006(5) Total Costs Accrued to Date Total Expected Program Costs (in millions) Initial Costs Other(4) Fiscal 2006 Oracle Restructuring Plan New software licenses Software license updates and product support Consulting On Demand Education (1) Other Total Fiscal 2006...

  • Page 85
    ... in-process research and development expenses, integration-related professional services, stock-compensation expenses and personnel related costs for transitional employees, as well as costs associated with our tender offer for PeopleSoft prior to the merger agreement date. Stock-based compensation...

  • Page 86
    ... obligations associated with these senior notes so that the interest payable on the senior notes effectively becomes variable based on the three-month LIBOR set quarterly until maturity. Our interest rate swap increased the effective interest rate on the senior notes to 7.30% as of May 31, 2006. The...

  • Page 87
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2006 6. DEFERRED REVENUES Deferred revenues consisted of the following: May 31, (in millions) Software license updates and product support Services New software licenses Deferred revenues, current...

  • Page 88
    ... rights, terms and conditions of the respective plans under which options were originally granted. As of May 31, 2006, options to purchase 88.0 million shares of common stock were outstanding under these plans. 85 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 89
    ...1, 2005 semi-annual option period, we amended the Purchase Plan such that employees can purchase shares of common stock at a price per share that is 95% of the fair value of Oracle stock as of the end of the semi-annual option period. Through May 31, 2006, 321.5 million shares had been issued and 87...

  • Page 90
    ... of stock splits, each share of common stock now has associated with it one-sixth of a Right. The Rights are not exercisable until the earlier of: (1) ten days (or such later date as may be determined by the Board of Directors) following an announcement that a person or group has acquired beneficial...

  • Page 91
    ... provision (benefit) Total provision for income taxes Effective income tax rate 88 2006 Year Ended May 31, 2005 2004 $ 938 97 434 1,469 (35) 8 (13) (40) 1,429 29.7% $ 624 135 472 1,231 (11) (24) (31) (66) 1,165 28.8% $ 701 77 428 1,206 9 48 1 58 1,264 32.0% $ $ $ Source: ORACLE CORP, 10...

  • Page 92
    ... stock Unremitted earnings of foreign subsidiaries Acquired intangibles Other Total deferred tax liabilities Deferred tax assets: Accruals and allowances Employee compensation and benefits Depreciation and amortization Tax credit and net operating loss carryforwards Differences in timing of revenue...

  • Page 93
    ...net income for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options and shares issuable under the employee stock purchase plan using the treasury stock method. The following table sets forth the computation of...

  • Page 94
    ... specific hedge accounting criteria are met and that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. We use derivatives to manage foreign currency and interest rate risk. 91 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by...

  • Page 95
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2006 Net Investment Hedges Periodically, we hedge the net assets of certain international subsidiaries (net investment hedges) using foreign currency forward contracts to offset the translation and ...

  • Page 96
    ... fiscal 2006. Primarily associated with changes in our deferred taxes associated with PeopleSoft intangibles acquired, partially offset by liabilities recorded for certain PeopleSoft pre-merger contingencies. 93 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Researchâ„

  • Page 97
    ...performance analysis, personalized support and annual on-site technical services. The education line of business provides instructor led, media based and internet based training in the use of our database, middleware and applications software. 94 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by...

  • Page 98
    ... table presents a summary of our businesses and operating segments: Year Ended May 31, 2005 (in millions) New software licenses: (1) Revenues Sales and distribution expenses (2) Margin Software license updates and product support: (1) Revenues Cost of services (2) Margin Total software business...

  • Page 99
    ...millions) Total margin for reportable segments Software license updates and product support revenues Product development and information technology expenses Marketing and partner program expenses Corporate and general and administrative expenses Amortization of intangible assets Acquisition related...

  • Page 100
    ... PeopleSoft in the applicable license transaction. PeopleSoft customers retain rights to the licensed products whether or not the CAP payments are triggered. The maximum potential penalty under the CAP, by version, as of May 31, 2006 was as follows: Dates Offered to Customers(1) Start Date End Date...

  • Page 101
    ... ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2006 17. GUARANTEES Our software license agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party's intellectual property rights...

  • Page 102
    ... the Oracle Small Business Suite. In the fourth quarter of fiscal 2004, we terminated the revenue sharing agreement with this company. In connection with our acquisition of PeopleSoft, we assumed a sublease with this company and received payments of $0.1 million and $0.2 million during fiscal 2006...

  • Page 103
    ... District of California against Siebel and certain of its officers relating to predicted adoption rates of Siebel v7.0 and certain customer satisfaction surveys. This complaint was consolidated and amended on August 27, 2004, with the Policemen's Annuity and Benefit Fund of Chicago being appointed...

  • Page 104
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2006 and unenforceable, are the only claims that the Court has left open for trial. On April 21, 2006 Mangosoft filed a motion asking that Mangosoft be allowed to appeal the non-infringement ruling ...

  • Page 105
    ... Year Ended: May 31, 2004 May 31, 2005 May 31, 2006 Beginning Balance Write-offs Translation Adjustments Ending Balance $ $ $ 376 364 269 102 173 197 241 (188) (300) (185) 3 8 - $ $ $ 364 269 325 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Researchâ„

  • Page 106
    ... 2006. ORACLE CORPORATION By: /s/ LAWRENCE J. ELLISON Lawrence J. Ellison, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date...

  • Page 107
    ... of Contents ORACLE CORPORATION INDEX OF EXHIBITS Exhibit Titles Exhibit No. 4.01 Specimen Certificate of Registrant's Common Stock Subsidiaries of the Registrant Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm Certification Pursuant to Section 302 of the Sarbanes...

  • Page 108
    ... officers. DATED: [SEAL] Counter signed and Registered: Computershare Trust Company, N.A. /s/ Safra A. Catz President Transfer Agent and Registrar BY /s/ Daniel Cooperman Secretary Authorized Signature Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 109
    ...-15. This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Preferred Share Rights Agreement between Oracle Corporation and Computershare Trust Company, N.A., as rights agent, dated as of January 31, 2006 (the "Rights Agreement"), the terms of which are...

  • Page 110
    ... Ltd. Siebel Systems Australia Pty. Limited edocs Asia-Pacific Pty Limited Eontec Australia Pty Limited Oracle Austria GmbH Oracle Belgium B.V.B.A./sprl. Oracle BH d.o.o., Sarajevo J.D. Edwards & Company Foreign Sales, Inc. Oracle do Brasil Sistemas Limitada PSFT (BVI) Holding Corporation PeopleSoft...

  • Page 111
    ...) Limited PeopleSoft Hong Kong Ltd. Retek International, Inc. (Hong Kong branch) Siebel Systems Hong Kong Limited Siebel Systems Asia Limited Oracle Hungary Kft. Siebel Systems Hungary Computer Technology Limited Liability Company Oracle India Private Ltd. Oracle Solution Services (India) Private...

  • Page 112
    ... Oracle Licensing B.V. Tinoway Nederland B.V. Oracle Scheduler BV Oracle East Central Europe Services BV Oracle UK Finance BV PeopleSoft International BV edocs Europe Netherlands BV Eontec BV Oracle Holding Antilles N.V. Oracle New Zealand, Ltd. PeopleSoft New Zealand Oracle Norge AS Siebel Systems...

  • Page 113
    ... UK Limited Eon Financial Solutions Limited Siebel Systems UK Limited ProfitLogic Europe Limited Siebel Systems Middle East FZ-LLC Oracle Uruguay, S.A. Oracle de Venezuela, C.A. PeopleSoft Venezuela S.A. Oracle Vietnam Pty. Ltd. Business OnLine, Inc. Collaxa, Inc. Delphi Asset Management Corporation...

  • Page 114
    ...Oracle Japan Holding, Inc. Oracle Taiwan, Inc. Oracle OTC Holdings LLC Oracle OTC Holdings General Partnership Oracle Systems Corporation Oracle UK Holdings LLC Oracle USA, Inc. PeopleSoft Texas, Inc. Reliaty, Inc. Retek Information Systems, Inc. Retek International Inc. RogersGrant Acquisition Corp...

  • Page 115
    ... the effectiveness of internal control over financial reporting of Oracle Corporation included in the Annual Report (Form 10-K) for the year ended May 31, 2006. /s/ ERNST & YOUNG LLP San Francisco, California July 20, 2006 Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document...

  • Page 116
    ... employees who have a significant role in the registrant's internal controls over financial reporting. b) Date: July 21, 2006 By: /s/ LAWRENCE J. ELLISON Lawrence J. Ellison Chief Executive Officer and Director Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 117
    ... employees who have a significant role in the registrant's internal controls over financial reporting. b) Date: July 21, 2006 By: /s/ SAFRA A. CATZ Safra A. Catz President, Chief Financial Officer and Director Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research...

  • Page 118
    ...Corporation. /s/ LAWRENCE J. ELLISON Name: Lawrence J. Ellison Chief Executive Officer and Director /s/ SAFRA A. CATZ Name: Safra A. Catz President, Chief Financial Officer and Director _____ Created by Morningstar® Document Research℠http://documentresearch.morningstar.com Source: ORACLE CORP...