Oracle 2006 Annual Report Download - page 45

Table of Contents
include the cost of providing the support services, largely personnel related expenses, and the amortization of
our intangible assets associated with software support and customer relationships obtained from our
acquisitions.
Year Ended May 31,
Percent Change Percent Change
(Dollars in millions) 2007 Actual Constant 2006 Actual Constant 2005
Software License Updates and
Product Support Revenues:
Americas $ 4,698 24% 23% $ 3,790 37% 36% $ 2,759
EMEA 2,653 29% 21% 2,052 10% 15% 1,866
Asia Pacific 978 23% 22% 794 13% 16% 705
Total revenues 8,329 25% 22% 6,636 25% 26% 5,330
Expenses:
Software license updates and
product support(1) 831 16% 12% 716 16% 17% 616
Stock-based compensation 11 306% 306% 3 15% 15% 2
Amortization of intangible
assets(2) 470 34% 34% 351 178% 178% 127
Total expenses 1,312 23% 21% 1,070 44% 45% 745
Total Margin $ 7,017 26% 23% $ 5,566 21% 23% $ 4,585
Total Margin % 84% 84% 86%
% Revenues by Geography:
Americas 57% 57% 52%
EMEA 32% 31% 35%
Asia Pacific 11% 12% 13%
(1) Excluding stock-based compensation
(2) Included as a component of ‘Amortization of Intangible Assets’ in our consolidated statements of
operations
Fiscal 2007 Compared to Fiscal 2006: Excluding the effect of currency rate fluctuations, software license
updates and product support revenues increased as a result of the addition of software license updates and
product support revenues associated with new software license revenues recognized during the fourth quarter
of fiscal 2006 and over the course of fiscal 2007, the renewal of substantially all of the customer base eligible
for renewal in the current fiscal year and incremental revenues from the expansion of our customer base from
acquisitions. Excluding the effect of currency rate fluctuations, the Americas contributed 59%, EMEA
contributed 29% and Asia Pacific contributed 12% to the increase in software license updates and product
support revenues.
Software license updates and product support revenues in fiscal 2007 include incremental revenues of
$310 million from Siebel, $37 million from i-flex, $19 million from Hyperion, and $55 million from other
recently 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, software license updates and product support revenues related to support
contracts in the amounts of $212 million, $391 million and $320 million that would have been otherwise
recorded by our acquired businesses as independent entities, were not recognized in fiscal 2007, 2006 and
2005, respectively. Historically, substantially all of our customers, including customers from acquired
companies, renew their support contracts when such contracts are eligible for renewal. To the extent these
underlying support contracts are renewed, we will recognize the revenues for the full value of these contracts
over the support periods, the majority of which are one year.
Excluding the effect of currency rate fluctuations, software license updates and product support expenses
increased due to higher salary and benefits associated with increased headcount to support the expansion of
our customer base, higher amortization expenses resulting from additional intangible assets acquired during
fiscal 2007 and fiscal 2006 and higher stock-based compensation expenses. Software license updates and
product support expenses
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Source: ORACLE CORP, 10-K, June 29, 2007 Powered by Morningstar® Document Research℠