Oracle 2007 Annual Report Download - page 46

Table of Contents
intangible assets associated with software support contracts and customer relationships obtained from our
acquisitions.
Year Ended May 31,
Percent Change Percent Change
(Dollars in millions) 2008 Actual Constant 2007 Actual Constant 2006
Software License Updates and Product Support
Revenues:
Americas $ 5,587 19% 17% $ 4,698 24% 23% $ 3,790
EMEA 3,503 32% 20% 2,653 29% 21% 2,052
Asia Pacific 1,238 27% 18% 978 23% 22% 794
Total revenues 10,328 24% 18% 8,329 25% 22% 6,636
Expenses:
Software license updates and product support(1) 987 19% 13% 831 16% 12% 716
Stock-based compensation 10 -6% -6% 11 306% 306% 3
Amortization of intangible assets(2) 596 27% 27% 470 34% 34% 351
Total expenses 1,593 21% 18% 1,312 23% 21% 1,070
Total Margin $ 8,735 24% 18% $ 7,017 26% 23% $ 5,566
Total Margin % 85% 84% 84%
% Revenues by Geography:
Americas 54% 57% 57%
EMEA 34% 32% 31%
Asia Pacific 12% 11% 12%
(1) Excluding stock-based compensation
(2) Included as a component of ‘Amortization of Intangible Assets’ in our consolidated statements of operations
Fiscal 2008 Compared to Fiscal 2007: The growth in our software license updates and product support
revenues was favorably affected by foreign currency rate fluctuations of 6 percentage points in fiscal 2008.
Excluding the effect of currency rate fluctuations, software license updates and product support revenues
increased in fiscal 2008 as a result of the addition of software license updates and product support contracts
associated with new software licenses sold during the fourth quarter of fiscal 2007 and over the course of
fiscal 2008, 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 53%, EMEA contributed 36% and Asia Pacific
contributed 11% to the increase in software license updates and product support revenues.
Software license updates and product support revenues in fiscal 2008 include incremental revenues of
$303 million from Hyperion, $38 million from BEA, $38 million from Agile, $30 million from Stellent,
$25 million from Metasolv, and $46 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 $179 million,
$212 million and $391 million that would have been otherwise recorded by our acquired businesses as
independent entities, were not recognized in fiscal 2008, 2007 and 2006, 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
substantial majority of which are one year.
Software license updates and product support expenses were adversely impacted by 3 percentage points of
unfavorable currency variations during fiscal 2008. 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 bonuses and commissions
due to increased revenues, and higher amortization expenses resulting from additional intangible assets
acquired during fiscal 2008 and fiscal 2007. Software license updates and product support expenses include
$7 million of expense growth from BEA in fiscal 2008. Total software license updates and product support
margin as a percentage of revenues
41
Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠