Oracle 2005 Annual Report Download - page 41

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Table of Contents
Software License Updates and Product Support: Software license updates grant customers rights to unspecified software product upgrades and maintenance
releases issued during the support period. Product support includes internet access to technical content as well as internet and telephone access to technical
support personnel. The cost of providing support services consists largely of personnel related expenses.
Year Ended May 31,
Percent Change Percent Change
(Dollars in millions) 2006 Actual Constant 2005 Actual Constant 2004
Software License Updates and Product
Support Revenues:
Americas $ 3,790 37% 36% $ 2,759 15% 14% $ 2,407
EMEA 2,052 10% 15% 1,866 21% 13% 1,542
Asia Pacific 794 13% 16% 705 22% 17% 580
Total revenues 6,636 25% 26% 5,330 18% 14% 4,529
Expenses:
Software license updates and product support(1) 716 16% 17% 616 13% 9% 547
Stock-based compensation 3 15% 15% 2 * * —
Amortization of intangible assets(2)
351 * * 127 * * —
Total expenses 1,070 44% 45% 745 36% 32% 547
Total Margin $ 5,566 21% 23% $ 4,585 15% 11% $ 3,982
Total Margin % 84% 86% 88%
% Revenues by Geography:
Americas 57% 52% 53%
EMEA 31% 35% 34%
Asia Pacific 12% 13% 13%
(1) Excluding stock-based compensation
(2) Included as a component of ‘Amortization of Intangible Assets’ in our consolidated statements of operations
* not meaningful
Fiscal 2006 Compared to Fiscal 2005: Excluding the effect of currency rate fluctuations, software license updates and product support revenues increased 26%
as a result of incremental revenues from the expansion of our customer base resulting from acquisitions, the renewal of substantially all of the subscription base
eligible for renewal in the current year and the addition of software license updates and product support revenues 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 fluctuations, the Americas contributed 72% to the growth in
software license updates and product support revenues, EMEA contributed 20% and Asia Pacific contributed 8%. Software license updates and product support
revenues in the Americas, specifically in the United States, increased at a faster rate than in other regions primarily due to the relative geographical mix of
revenues and existing support contract bases of our acquired companies.
As a result of our acquisitions, we recorded adjustments to reduce support obligations assumed to their estimated fair value at the acquisition dates. Due to our
application of business combination accounting rules, we did not recognize software license updates and product support revenues related to support contracts in
the amounts of $391 million and $320 million that would have been otherwise recorded by our acquired businesses as independent entities in fiscal 2006 and
2005, respectively. Historically, substantially all of our customers, including customers from acquired companies, renew their support contracts when the
contract is eligible for
38
Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research℠