Oracle 2007 Annual Report Download - page 42

Table of Contents
Fiscal 2008 Compared to Fiscal 2007: Total revenues increased in fiscal 2008 due to increased demand for
our products and services offerings and incremental revenues from our acquisitions. The growth in our total
revenues was positively affected by foreign currency rate fluctuations of 6 percentage points in fiscal 2008
due to the weakening of the U.S. Dollar relative to other major international currencies. Excluding the effect
of currency rate fluctuations, new software license revenues contributed 38% to the growth in total revenues,
software license updates and product support revenues contributed 45% and services revenues contributed
17%. Excluding the effect of currency rate fluctuations, the Americas contributed 50% to the increase in total
revenues, EMEA contributed 37% and Asia Pacific contributed 13%.
Total operating expenses were adversely affected by foreign currency rate fluctuations of 4 percentage points.
Excluding the effect of currency rate fluctuations, the increase in operating expenses is primarily due to
higher salary and employee benefits associated with increased headcount levels (primarily resulting from our
fiscal 2007 acquisitions, Agile in the first quarter of fiscal 2008 and, to a lesser extent, BEA in the fourth
quarter of fiscal 2008), as well as higher commissions and bonuses associated with increased revenues,
earnings and headcount levels. In addition, operating expenses also increased in fiscal 2008 due to higher
expenses from the amortization of intangible assets and additional stock-based compensation resulting from a
higher fair value of grants issued in fiscal 2008 (caused primarily by our higher stock price) and the
acceleration of vesting of certain acquired stock awards upon employee terminations pursuant to the original
terms of those awards. Total operating expenses in fiscal 2007 were also reduced by a $52 million benefit as a
result of a settlement of an acquired legal contingency from PeopleSoft for less than the amount accrued as of
the end of the purchase price allocation period. The increases in operating expenses during fiscal 2008 were
partially offset by a $57 million gain on property sale and a $127 million reduction of in-process research and
development from our fiscal 2008 acquisitions in comparison to our fiscal 2007 acquisitions.
Total operating margin as a percentage of total revenues increased during fiscal 2008. The growth in our
operating margin in fiscal 2008 was the result of our revenue growth, both organic and from acquisitions, and
the relatively fixed nature of our cost structure in the short term. In addition, our operating margin growth was
favorably affected by foreign currency rate fluctuations of 9 percentage points.
International operations will continue to provide a significant portion of our total revenues and expenses. As a
result, total revenues and expenses will continue to be affected by changes in the relative strength of the
U.S. Dollar against certain major international currencies.
Fiscal 2007 Compared to Fiscal 2006: Total revenues increased in fiscal 2007 due to increased demand for
our products and services offerings and incremental revenues from our acquisitions. Total revenues were
positively affected by foreign currency rate fluctuations of 3 percentage points in fiscal 2007 due to the
weakening of the U.S. Dollar relative to other major international currencies. Excluding the effects of
currency rate fluctuations, new software license revenues contributed 27% to the growth in total revenues,
software license updates and product support revenues contributed 47% and services revenues contributed
26%. Excluding the effect of currency rate fluctuations, the Americas contributed 56% to the increase in total
revenues, EMEA contributed 30% and Asia Pacific contributed 14%.
Operating expenses were adversely affected by foreign currency rate fluctuations of 3 percentage points.
Excluding the effect of currency rate fluctuations, the increase in total operating expenses was primarily due
to higher salary and employee benefits associated with increased headcount levels (primarily resulting from
our acquisitions), as well as higher commissions and travel and entertainment expenses associated with both
increased revenues and headcount levels. In addition, operating expenses also increased in fiscal 2007 due to
higher amortization costs of intangible assets and stock-based compensation expenses related to our adoption
of Statement 123(R) at the beginning of fiscal 2007. The aforementioned increases in operating expenses
were partially offset by lower restructuring expenses and the settlement of a PeopleSoft contingency that
provided a $52 million benefit to our operating expenses (see Acquisition Related and Other Expenses
discussion below).
Operating margins as a percentage of total revenues were flat in fiscal 2007 in comparison to fiscal 2006 and
were favorably affected by foreign currency rate fluctuations of 5 percentage points. Our revenues grew at a
faster rate than our operating expenses, excluding the impact of amortization costs of intangible assets and
stock-based compensation expenses. The increases in those cost categories offset the slower growth in our
other operating expenses.
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠