Oracle 2005 Annual Report Download - page 18

Table of Contents
If a successful claim is made against us and we fail to develop or license a substitute technology, our business, results of operations, financial condition or cash
flows could be adversely affected. A patent infringement case is discussed under Note 21 in our Notes to Consolidated Financial Statements.
We may need to change our pricing models to compete successfully. The intensely competitive markets in which we compete can put pressure on us to reduce
our prices. If our competitors offer deep discounts on certain products, we may need to lower prices or offer other favorable terms in order to compete
successfully. Any such changes would likely reduce margins and could adversely affect operating results. Our software license updates and product support fees
are generally priced as a percentage of our new license fees. Our competitors may offer a lower percentage pricing on product updates and support, which could
put pressure on us to further discount our new license prices. Any broadly-based changes to our prices and pricing policies could cause new software license and
services revenues to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies. Some of our competitors may
bundle software products for promotional purposes or as a long-term pricing strategy or provide guarantees of prices and product implementations. These
practices could, over time, significantly constrain the prices that we can charge for our products. In addition, if we do not adapt our pricing models to reflect
changes in customer use of our products, our new software license revenues could decrease. Additionally, increased distribution of applications through
application service providers may reduce the average price for our products or adversely affect other sales of our products, reducing new software license
revenues unless we can offset price reductions with volume increases or lower spending. The increase in open source software distribution may also cause us to
change our 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 intelligence products that compete
with our offerings. In addition, several companies offer business outsourcing as a competitive alternative to buying software. Some of these competitors have
greater financial or technical resources than we do. Also, our competitors who offer business applications and application server products may influence a
customer’s purchasing decision for the underlying database in an effort to persuade potential customers not to acquire our products. We could lose market share
if our competitors introduce new competitive products, add new functionality, acquire competitive products, reduce prices or form strategic alliances with other
companies. We may also face increasing competition from open source software initiatives, in which competitors may provide software and intellectual property
free. Existing or new competitors could gain market share in any of our markets at our expense.
Our periodic sales force restructurings can be disruptive. We continue to rely heavily on our direct sales force. We have in the past restructured or made other
adjustments to our sales force in response to management changes, product changes, performance issues, acquisitions and other internal and external
considerations. In the past, sales force restructurings have generally resulted in a temporary lack of focus and reduced productivity; these effects could recur in
connection with future acquisitions and other restructurings and our revenues could be negatively affected.
Disruptions of our indirect sales channel could affect our future operating results. Our indirect channel network is comprised primarily of resellers, system
integrators/implementers, consultants, education providers, internet service providers, network integrators and independent software vendors. Our relationships
with these channel participants are important elements of our marketing and sales efforts. Our financial results could be adversely affected if our contracts with
channel participants were terminated, if our relationships with channel participants were to deteriorate, if any of our competitors enter into strategic relationships
with or acquire a significant channel participant or if the financial condition of our channel participants were to weaken. There can be no assurance that we will
be successful in maintaining, expanding or developing our relationships with channel participants. If we are not successful, we may lose sales opportunities,
customers and market share.
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Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research℠