Oracle 2005 Annual Report Download - page 21

Download and view the complete annual report

Please find page 21 of the 2005 Oracle annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

Table of Contents
versions of products and could adversely affect market acceptance of our products. If we experience errors or delays in releasing new products or new versions of
products, we could lose revenues. In addition, we run our own business operations, Oracle On Demand, and other outsourcing, support and consulting services,
on our products and networks and any security flaws, if exploited, could affect our ability to conduct business operations. End users, who rely on our products
and services for applications that are critical to their businesses, may have a greater sensitivity to product errors and security vulnerabilities than customers for
software products generally. Software product errors and security flaws in our products or services could expose us to product liability, performance and/or
warranty claims as well as harm our reputation, which could impact our future sales of products and services. The detection and correction of any security flaws
can be time consuming and costly.
We may not receive significant revenues from our current research and development efforts for several years, if at all. Developing and localizing software is
expensive and the investment in product development often involves a long payback cycle. We have and expect to continue making significant investments in
software research and development and related product opportunities. Accelerated product introductions and short product life cycles require high levels of
expenditures for research and development that could adversely affect our operating results if not offset by revenue increases. We believe that we must continue
to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we do not expect to receive
significant revenues from these investments for several years if at all.
Our sales to government clients subject us to risks including early termination, audits, investigations, sanctions and penalties. We derive revenues from
contracts with the United States government, state and local governments and their respective agencies, who may terminate most of these contracts at any time,
without cause.
There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. Our federal government contracts are
subject to the approval of appropriations being made by the United States Congress to fund the expenditures under these contracts. Similarly, our contracts at the
state and local levels are subject to government funding authorizations.
Additionally, government contracts are generally subject to audits and investigations which could result in various civil and criminal penalties and administrative
sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or
debarment from future government business. For example, there is a pending U.S. government investigation of PeopleSoft’s pricing practices prior to our
acquisition under multiple award schedule contracts. While we do not believe that this investigation will result in material damages, we could be subject to
similar investigations or actions in the future.
Business disruptions could affect our operating results. A significant portion of our research and development activities and certain other critical business
operations is concentrated in a few geographic areas. We are a highly automated business and a disruption or failure of our systems could cause delays in
completing sales and providing services, including some of our On Demand offerings. A major earthquake, fire or other catastrophic event that results in the
destruction or disruption of any of our critical business or information technology systems could severely affect our ability to conduct normal business operations
and as a result our future operating results could be materially and adversely affected.
We may have exposure to additional tax liabilities. As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both
the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax
liabilities.
In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate 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 Research℠