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Morningstar® Document Research℠
FORM 10-K
ORACLE CORP - ORCL
Filed: June 29, 2009 (period: May 31, 2009)
Annual report with a comprehensive overview of the company

Table of contents

  • Page 1
    Morningstar Document Research ® ℠FORM 10-K ORACLE CORP - ORCL Filed: June 29, 2009 (period: May 31, 2009) Annual report with a comprehensive overview of the company

  • Page 2
    ... executive offices, including zip code) (Registrant's telephone number, including area code) 500 Oracle Parkway Redwood City, California 94065 (650) 506-7000 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share None Title of Each Class Name of...

  • Page 3
    ... a determination that persons are affiliates for any other purposes. Number of shares of common stock outstanding as of June 22, 2009: 5,007,230,000 Documents Incorporated by Reference: Portions of the registrant's definitive proxy statement relating to its 2009 annual stockholders' meeting are...

  • Page 4
    ... with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information 25 27 27 61 63 64 64 65 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 5
    EXHIBIT 12.01 EXHIBIT 21.01 EXHIBIT 23.01 EXHIBIT 31.01 EXHIBIT 31.02 EXHIBIT 32.01 Signatures 119 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Researchâ„

  • Page 6
    ... into an Agreement and Plan of Merger with Sun Microsystems, Inc. (Sun), a provider of enterprise computing systems, software and services, under which we have agreed to acquire all outstanding shares of Sun for $9.50 per share in cash. The estimated total purchase price for Sun is approximately...

  • Page 7
    ...by automating business functions. New software license revenues include fees earned from granting customers licenses to use our software products and exclude revenues derived from software license updates and product support. The standard end user software license agreement for our products provides...

  • Page 8
    ...PeopleSoft, Oracle E-Business Suite or custom applications including Service-Oriented Architecture applications. In addition to managing Oracle software infrastructure products including the Oracle Database, Oracle Fusion Middleware and Oracle WebLogic Server, Oracle Enterprise Manager also supports...

  • Page 9
    ... languages and tools, which allows developers to build and deploy web services, web sites, portals and web-based applications. Oracle's Fusion Middleware is used to support Oracle applications, other enterprise applications, independent software vendors that build their own custom applications and...

  • Page 10
    ... and Access Management Oracle Identity and Access Management products and suites make it easier for our customers to manage multiple user identities, provision users in multiple enterprise applications and systems and manage access privileges for customers, employees and partners. Our customers use...

  • Page 11
    ... applications by offering them the ability to purchase software license updates and product support contracts for their existing products. Solutions such as Oracle Fusion Middleware, Oracle Business Intelligence Suite, Oracle WebCenter, and Oracle User Productivity Kit are designed to help customers...

  • Page 12
    ...financial performance. Our performance management applications, combined with our BI analytics, BI foundation and data warehousing products, enable us to offer our customers an integrated, end-to-end EPM system that spans 7 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document...

  • Page 13
    ... system and Oracle VM server virtualization software support. Our software license updates and product support revenues represented 50% of total revenues in fiscal 2009, and 46% of total revenues in both fiscal 2008 and 2007. Services Business Consulting Oracle Consulting assists our customers...

  • Page 14
    ...and applications software delivered at our data center facilities, select partner data centers or physically on-site at customer facilities. Advanced Customer Services consists of solution lifecycle management services, database and application management services, industry-specific solution support...

  • Page 15
    ... business intelligence, data integration, portal server and identity management); • enterprise applications; • content management and collaboration; • development tools; • enterprise management software; • Software-as-a-Service; • hosted and On Demand solutions; • operating systems (by...

  • Page 16
    ...include application server and application grid, business intelligence, identity and access management, portal and user interaction, Service-Oriented Architecture and business process management, and data integration. Our ability to offer a full range of rich functionality in a standards-based, open...

  • Page 17
    ... our current product offerings including our database, middleware and applications software products. Employees As of May 31, 2009, we employed approximately 86,000 full-time employees, including 20,000 in sales and marketing, 8,000 in software license updates and product support, 28,000 in services...

  • Page 18
    ... Chief Financial Officer Executive Vice President, Europe, Middle East and Africa (EMEA) Sales and Consulting Executive Vice President, Latin America Sales and Consulting Executive Vice President, Oracle Customer Services Executive Vice President, Product Development Executive Vice President, Japan...

  • Page 19
    ... affect our business, operating results or financial condition in a number of ways which, in turn, could adversely affect our stock price. For example, current or potential customers may reduce their IT spending or be unable to fund software or services purchases, which could cause them to delay...

  • Page 20
    ...operations and financial condition, including our revenue growth and profitability. These factors generally have the strongest effect on our sales of new software licenses and related services and, to a lesser extent, also affect our renewal rates for software license updates and product support. We...

  • Page 21
    ... and/or price our products and services to meet market demand, customers may not buy new software licenses or purchase or renew software license updates and product support contracts. Renewals of these support contracts are an important factor in the growing software license update and product...

  • Page 22
    ...a larger than predicted number of customers decline to renew software license updates and product support contracts, if we are unable to sell the acquired products to our customer base or if contract models of an acquired company do not allow us to recognize revenues on a timely basis; • we may be...

  • Page 23
    ... at favorable tax rates; • difficulties in transferring funds from certain countries; and • reduced protection for intellectual property rights in some countries. As the majority shareholder of Oracle Financial Services Software Limited (formerly i-flex solutions limited), a publicly traded...

  • Page 24
    ... priced as a percentage of our net new software license fees. Our competitors may offer lower percentage pricing on product updates and support, which could put pressure on us to further discount our new license prices. 19 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document...

  • Page 25
    ...these competitors have greater financial or technical resources than we do. Our competitors that offer business applications and middleware products may influence a customer's purchasing decision for the underlying database in an effort to persuade potential customers not to acquire our products. We...

  • Page 26
    ... in the useful lives of intangible assets acquired; • identification of assumed contingent liabilities after the measurement period (generally up to one year from the acquisition date) has ended; • charges to our operating results to eliminate certain duplicative pre-merger activities, to...

  • Page 27
    ... 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 22 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document...

  • Page 28
    ... applications and database technology, delivered at our data center facilities, select partner data centers or customer facilities. We also offer CRM On Demand, which is a service offering that provides our customers with our CRM software functionality delivered via a hosted solution that we manage...

  • Page 29
    ... of owned and leased office facilities for sales, support, research and development, consulting and administrative personnel. Our headquarters facility consists of approximately 2.1 million square feet in Redwood City, California. We also own or lease office facilities for current use consisting of...

  • Page 30
    ... record and payment dates are subject to the final determination of our Board of Directors. For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report. Stock Repurchase Programs Our Board of Directors has approved a program for Oracle to repurchase shares of...

  • Page 31
    ... in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN* AMONG ORACLE CORPORATION, THE S&P 500 INDEX AND THE DOW JONES U.S. SOFTWARE INDEX * $100 INVESTED ON MAY 31...

  • Page 32
    ... financial statements since their respective dates of acquisition and have contributed to our growth in revenues, income and earnings per share. (in millions, except per share amounts) 2009 As of and For The Year Ended May 31, 2008 2007 2006 2005 Consolidated Statements of Operations Data: Total...

  • Page 33
    Table of Contents Business Overview We are the world's largest enterprise software company. We develop, manufacture, market, distribute and service database and middleware software as well as applications software designed to help our customers manage and grow their business operations. We believe ...

  • Page 34
    ... fair values at the acquisition dates. As a result, as required by business combination accounting rules, we did not recognize software license updates and product support revenues related to support contracts that would have been otherwise recorded by the acquired businesses as independent entities...

  • Page 35
    ... of the merger will generally be converted into options, restricted stock unit awards or other equity-based awards, as the case may be, denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement. The estimated total purchase price of Sun is approximately...

  • Page 36
    ...new software license and software license updates and product support revenues, and (2) services, which include consulting, On Demand and education revenues. New software license revenues represent fees earned from granting customers licenses to use our database, middleware and applications software...

  • Page 37
    ... facilities, select partner data centers or customer facilities. Advanced Customer Services provide customers with solution lifecycle management services, database and application management services, industry-specific solution support centers and remote and on-site expert services. Revenues from On...

  • Page 38
    ... include but are not limited to: • future expected cash flows from software license sales, support agreements, consulting contracts, other customer contracts and acquired developed technologies and patents; 33 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Researchâ„

  • Page 39
    ... of consolidating duplicate facilities and contract termination costs. Restructuring expenses are based upon plans that have been committed to by management, but are generally subject to refinement during the purchase price allocation period (generally within one year of the acquisition date). To...

  • Page 40
    ... consolidated financial statements, including adjustments to depreciation, amortization, or other income effects recognized in the initial accounting. Identifying changes to the initial accounting requires our 35 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Research...

  • Page 41
    ... identified in Note 15 of Notes to Consolidated Financial Statements. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net...

  • Page 42
    ...the applicable portion of the previously provided valuation allowance. We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns...

  • Page 43
    ... financial position. Stock-Based Compensation We account for share-based payments to employees, including grants of employee stock awards and purchases under employee stock purchase plans in accordance with FASB Statement No. 123 (revised 2004), Share-Based Payment, which requires that share-based...

  • Page 44
    ... the contribution of our acquired products to the growth in new software license revenues and to the growth in software license updates and product support revenues for the one year period subsequent to the acquisition date. We also present supplemental disclosure related to certain charges and...

  • Page 45
    ...the fiscal 2009 results using the fiscal 2008 exchange rate and indicate, in this example, no change in revenues during the period. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency. 40 Source: ORACLE CORP, 10...

  • Page 46
    ... currency basis, total revenues increased in fiscal 2009 primarily due to higher software license update and product support revenues in all regions due to the high attachment rate of support contracts to our new software license sales and the renewal of substantially all of our eligible customer...

  • Page 47
    ... our application of business combination accounting rules, we did not recognize software license updates and product support revenues related to support contracts that would have otherwise been recorded by the acquired 42 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document...

  • Page 48
    ... Accounting Policies and Estimates" above). (5) Stock-based compensation is included in the following operating expense line items of our consolidated statements of operations (in millions): 2009 2008 2007 Sales and marketing Software license updates and product support Cost of services Research...

  • Page 49
    Table of Contents Software Software includes new software licenses and software license updates and product support. New Software Licenses: New software license revenues represent fees earned from granting customers licenses to use our database and middleware as well as our application software ...

  • Page 50
    ... new software licenses revenues growth rate and a favorable foreign currency impact, partially offset by higher growth rates in our amortization of intangible assets and stock-based compensation expenses. Software License Updates and Product Support: Software license updates grant customers rights...

  • Page 51
    ... 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 $243 million, $179 million and $212 million that would have been otherwise recorded by our acquired businesses...

  • Page 52
    ... related expenditures. Year Ended May 31, Percent Change Percent Change Actual Constant 2008 Actual Constant (Dollars in millions) 2009 2007 Consulting Revenues: Americas EMEA Asia Pacific Total revenues Expenses: Cost of services(1) Stock-based compensation Amortization of intangible assets...

  • Page 53
    ... center facilities, at select partner data centers, or at customer facilities. Advanced Customer Services consists of solution lifecycle management services, database and application management services, industry-specific solution support centers and remote and on-site expert services. The cost of...

  • Page 54
    ... category's subscription base as a greater number of customers engaged us to provide IT services and outsourcing solutions. On a constant currency basis, Advanced Customer Services contributed the majority of our On Demand revenues growth. Excluding the effect of currency rate fluctuations, the...

  • Page 55
    ... Customer Services margin and margin percentages also improved in comparison to fiscal 2007. Education: Education revenues are earned by providing instructor-led, media-based and internet-based training in the use of our database and middleware software products as well as applications software...

  • Page 56
    ... related expenditures for information technology, finance, legal and human resources support functions. Year Ended May 31, Percent Change Percent Change Actual Constant 2008 Actual Constant (Dollars in millions) 2009 2007 Stock-based compensation Total expenses % of Total Revenues General...

  • Page 57
    ... to Fiscal 2008: On a constant currency basis, acquisition related and other expenses decreased slightly due to lower stock-based compensation expenses in fiscal 2009 caused primarily by the timing of stock option accelerations for certain former Hyperion and BEA employees that were incurred in the...

  • Page 58
    ... regarding our Oracle-based restructuring plans, as well as restructuring activities of our acquired companies, please see Note 8 of Notes to Consolidated Financial Statements. Year Ended May 31, Percent Change Percent Change Actual Constant 2008 Actual Constant (Dollars in millions) 2009 2007...

  • Page 59
    ... net foreign currency exchange gains and losses, the minority owners' share in the net profits of our majority-owned Oracle Financial Services Software Limited (formerly i-flex solutions limited) and Oracle Japan subsidiaries, and other income, net, including net realized gains and losses related to...

  • Page 60
    ... comparison to $2.0 billion used for stock repurchases during fiscal 2008), cash used for our acquisitions, cash used to repay $1.0 billion of our Senior Notes that matured in May 2009 and the reclassification of $1.0 billion of our Senior Notes due May 2010 as a current liability, cash used to pay...

  • Page 61
    ... our customers following the purchase and renewal of their software license updates and product support agreements. Payments from customers for software license updates and product support agreements are generally received near the beginning of the contracts' terms, which are generally one year in...

  • Page 62
    ... accepted accounting principles. Long-Term Customer Financing: We offer certain of our customers the option to acquire our software products and service offerings through separate long-term payment contracts. We generally sell contracts that we have financed on a non-recourse basis to financial...

  • Page 63
    ...a provider of enterprise computing systems, software and services. Pursuant to the Merger Agreement, our wholly owned subsidiary will merge with and into Sun and Sun will become a wholly owned subsidiary of Oracle. Upon the consummation of the merger, each share of Sun common stock will be converted...

  • Page 64
    ... of the merger will generally be converted into options, restricted stock unit awards or other equity-based awards, as the case may be, denominated in shares of our common stock based on formulas contained in the Merger Agreement. The estimated total purchase price of Sun is approximately...

  • Page 65
    ... in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. The sum of the quarterly financial information may vary from the annual data due to rounding. (in millions, except per share amounts) August 31 Fiscal 2009 Quarter Ended (Unaudited...

  • Page 66
    ... of Contents The Compensation Committee of the Board of Directors reviews and approves the organization-wide stock option grants to selected employees, all stock option grants to executive officers and any individual stock option grants in excess of 100,000 shares. A separate Plan Committee, which...

  • Page 67
    ...in the accompanying consolidated statements of operations were $(65) million, $17 million and $17 million in fiscal 2009, 2008 and 2007, respectively. Foreign Currency Translation Risk Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign...

  • Page 68
    ... our majority owned subsidiary, Oracle Japan. The notional amount of our net investment hedge was $694 million and had a nominal fair value as of May 31, 2009. Item 8. Financial Statements and Supplementary Data The response to this item is submitted as a separate section of this Annual Report. See...

  • Page 69
    ... and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Based on the results of our evaluation, our management...

  • Page 70
    ...Membership and Meetings-Fiscal 2009 Committee Memberships," "Board of Directors-Committees, Membership and Meetings-The Finance and Audit Committee," "Corporate Governance-Employee Matters-Code of Conduct" and "Section 16(a) Beneficial Ownership Reporting Compliance". Item 11. Executive Compensation...

  • Page 71
    ... includes 78 million shares available for future issuance under the Oracle Corporation Employee Stock Purchase Plan. (3) These options and restricted stock units were assumed in connection with our acquisitions. No additional awards were or can be granted under the plans that originally issued...

  • Page 72
    ... Filed Here with 2.01 2.02 3.01 3.02 4.01 4.02 4.03 Agreement and Plan of 8-K 000-22369 Merger, dated January 16, 2008, among Oracle Corporation, BEA Systems, Inc. and Bronco Acquisition Corporation Agreement and Plan of 8-K 000-15086 Merger, dated April 19, 2009, among Oracle Corporation, Sun...

  • Page 73
    ... Rate Note due 2010, together with Officers' Certificate issued May 15, 2007 setting forth the terms of the Notes 67 4.4 4/14/06 Oracle Corporation 4.3 5/10/07 Oracle Corporation 4.01 5/15/07 Oracle Corporation Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document...

  • Page 74
    ... of the Notes Oracle Corporation 1993 Deferred Compensation Plan, as amended and restated as of January 1, 2008 Oracle Corporation Employee Stock Purchase Plan (1992), as amended and restated as of February 8, 2005 Oracle Corporation Amended and Restated 1993 Directors' Stock Plan, as amended and...

  • Page 75
    ... 000-14376 Bonus Plan Agreements for the Oracle Executive Bonus Plan, Non-Sales 68 10.25 8/30/05 Oracle Systems Corporation 10.13 9/17/04 Oracle Systems Corporation 10.29 1/5/06 Oracle Systems Corporation Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Researchâ„

  • Page 76
    ... the Fiscal Year 2009 Executive Bonus Plan Employment Agreement of Loic Le Guisquet dated November 18, 1999 $2,000,000,000 364-Day Revolving Credit Agreement dated as of March 17, 2009, among Oracle Corporation and the lenders and agents named therein Consolidated Ratio of Earnings to Fixed Charges...

  • Page 77
    ...Pursuant to Section 302 of the Sarbanes-Oxley Act-Jeff Epstein Certification Pursuant to Section 906 of the Sarbanes-Oxley Act 69 X X X X * Indicates management contract or compensatory plan or arrangement. Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Researchâ„

  • Page 78
    ... of Oracle Corporation at May 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended May 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement...

  • Page 79
    ...control over financial reporting as of May 31, 2009, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Oracle Corporation as of May 31, 2009 and 2008, and the related...

  • Page 80
    Table of Contents ORACLE CORPORATION CONSOLIDATED BALANCE SHEETS As of May 31, 2009 and 2008 (in millions, except per share data) ASSETS Current assets: Cash and cash equivalents Marketable securities Trade receivables, net of allowances of $270 and $303 as of May 31, 2009 and 2008 Deferred tax ...

  • Page 81
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended May 31, 2009, 2008 and 2007 (in millions, except per share data) 2009 Year Ended May 31, 2008 2007 Revenues: New software licenses Software license updates and product support Software revenues Services ...

  • Page 82
    ...ORACLE CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended May 31, 2009, 2008 and 2007 Common Stock and Additional Paid in Capital Number of Shares Amount Accumulated Other Comprehensive Income (in millions) Comprehensive Income Retained Earnings Deferred Compensation...

  • Page 83
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended May 31, 2009, 2008 and 2007 (in millions) 2009 Year Ended May 31, 2008 2007 Cash Flows From Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating ...

  • Page 84
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS May 31, 2009 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Oracle Corporation develops, manufactures, markets, distributes and services database and middleware software, as well as applications software, that help organizations manage...

  • Page 85
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 New software license revenues represent fees earned from granting customers licenses to use our database, middleware and applications software, and exclude revenues derived from software license...

  • Page 86
    ...for our database, middleware and applications software. Advanced Customer Services consists of solution lifecycle management services, database and application management services, industry-specific solution support centers and remote and on-site expert services. Revenues from On Demand services are...

  • Page 87
    ... combination date including: • estimated fair values of stock awards assumed from the acquiree that are included in the purchase price; • estimated fair values of intangible assets acquired from the acquiree; • estimated fair values of software license updates and product support obligations...

  • Page 88
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, ...

  • Page 89
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 Upon our adoption of Statement 141(R), should the initial accounting for a business combination be incomplete by the end of a reporting period that falls within the measurement period, we will ...

  • Page 90
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 Based on the trading prices of our $10.25 billion and $11.25 billion senior notes outstanding as of May 31, 2009 and 2008, respectively, and the interest rates we could obtain for other ...

  • Page 91
    ... in our consolidated statements of operations and were $(55) million, $40 million and $45 million in fiscal 2009, 2008 and 2007, respectively. Stock-Based Compensation We account for share-based payments, including grants of employee stock awards and purchases under employee stock purchase plans, in...

  • Page 92
    ... accounting for Statement 123(R). We recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally four years. The fair value of the unvested portion of share-based payments granted prior to June 1, 2006 (our adoption date of Statement...

  • Page 93
    ...net foreign currency exchange gains (losses), the minority owners' shares in the net profits of our majority-owned subsidiaries (Oracle Financial Services Software Limited, formerly i-flex solutions limited, and Oracle Japan), and other income, net, including net realized gains and losses related to...

  • Page 94
    ...(R), which could materially affect our consolidated financial statements. Historically, we have generally utilized the intangible assets we acquire as a part of our ongoing operations subsequent to the acquisition date. Determination of the Useful Life of Intangible Assets: In April 2008, the FASB...

  • Page 95
    ...Oracle stockholders and the noncontrolling interests. In addition, Statement 160 requires that any change in our ownership of a majority-owned subsidiary be prospectively accounted for as an equity transaction provided that we retain control of the subsidiary. This requirement is a change to current...

  • Page 96
    ... be converted into options, restricted stock unit awards or other equity-based awards, as the case may be, denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement. The estimated total purchase price of Sun is approximately $7.4 billion. The Merger Agreement...

  • Page 97
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 The total purchase price for BEA was $8.6 billion which consisted of $8.3 billion in cash paid to acquire the outstanding common stock of BEA, $225 million for the fair value of BEA options ...

  • Page 98
    ... reporting periods and the dates these companies were acquired by us, and the effects of the pro forma adjustments listed above. The unaudited pro forma financial information was as follows for fiscal 2009 and 2008: (in millions, except per share data) Year Ended May 31, 2009 2008 Total revenues...

  • Page 99
    ... related positions did not have a material impact on our consolidated financial statements. Statement 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When...

  • Page 100
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Our significant financial assets and liabilities measured at fair value on a recurring basis, excluding accrued ...

  • Page 101
    ...2008 Accumulated Amortization Expense May 31, 2009 Intangible Assets, net May 31, May 31, 2008 2009 Weighted Average Useful Life Software support agreements and related relationships Developed technology Core technology Customer relationships Trademarks Total $ 4,849 3,607 1,427 1,183 262 $ 163...

  • Page 102
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 7. NOTES PAYABLE AND OTHER BORROWINGS Notes payable and other borrowings consisted of the following: (Dollars in millions) May 31, 2009 May 31, 2008 Floating rate senior notes due May 2009 ...

  • Page 103
    ... 30-day moving average credit default swap mid-rate spread for Oracle for a one-year period, subject to a maximum and minimum rate based on our credit rating, or (y) a "base rate" calculated as the highest of (I) Wachovia Bank National Association's prime rate, (II) the federal funds effective rate...

  • Page 104
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 8. RESTRUCTURING ACTIVITIES Fiscal 2009 Oracle Restructuring Plan During the third quarter of fiscal 2009, our management approved, committed to and initiated plans to restructure and further ...

  • Page 105
    ...(3) Year Ended May 31, 2009 Adj. Cash to Cost(4) Payments Accrued May 31, 2009(2) Total Costs Accrued to Date Total Expected Program Costs (in millions) Others(5) Fiscal 2009 Oracle Restructuring Plan New software licenses $ Software license updates and product support Services Other(1) Total...

  • Page 106
    ...Initial Costs(3) Year Ended May 31, 2008 Adj. Cash to Cost(4) Payments Others(5) Accrued May 31, 2008(2) Fiscal 2008 Oracle Restructuring Plan New software licenses Software license updates and product support Services Other(1) Total Fiscal 2008 Oracle Restructuring BEA Restructuring Plan Severance...

  • Page 107
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 Fiscal 2007 Activity (in millions) Accrued May 31, 2006 Initial Costs(3) Year Ended May 31, 2007 Adj. Cash to Cost(4) Payments Others(5) Accrued May 31, 2007(2) Hyperion Restructuring Plan ...

  • Page 108
    ... customer payments made in advance for annual support contracts. Software license updates and product support contracts are typically billed on a per annum basis in advance and revenues are recognized ratably over the support periods. Deferred service revenues include prepayments for consulting...

  • Page 109
    ... exposures related to our foreign currency-based investments in these subsidiaries. These contracts have been designated as net investment hedges pursuant to Statement 133. We use the spot method to measure the effectiveness of our net investment hedges. Under this method for each reporting period...

  • Page 110
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 The effects of derivative instruments on our consolidated financial statements were as follows as of May 31, 2009 and for the year then ended (amounts presented exclude any income tax effects): ...

  • Page 111
    ... and have not accrued any liabilities related to such obligations in our consolidated financial statements. Certain of our software license agreements also include provisions indemnifying customers against liabilities in the event we breach confidentiality or service level requirements. It is not...

  • Page 112
    ... ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 particular agreement. Historically, payments made by us under these agreements have not had a material effect on our results of operations, financial position, or cash flows. Our software license agreements...

  • Page 113
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 13. EMPLOYEE BENEFIT PLANS Stock-based Compensation Plans Stock Option Plans In fiscal 2001, we adopted the 2000 Long-Term Equity Incentive Plan (the 2000 Plan), which replaced the 1991 Long-...

  • Page 114
    ... ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 In connection with certain of our acquisitions, including BEA, PeopleSoft, Siebel and Hyperion, we assumed all of the outstanding stock options and other stock awards of each acquiree's respective stock plans...

  • Page 115
    ... in our consolidated statements of operations: (in millions) 2009 Year Ended May 31, 2008 2007 Sales and marketing Software license updates and product support Cost of services Research and development General and administrative Acquisition related and other Total stock-based compensation Estimated...

  • Page 116
    ... Payment Awards. Employee Stock Purchase Plan We have an Employee Stock Purchase Plan (Purchase Plan) and have amended the Purchase Plan such that employees can purchase shares of common stock at a price per share that is 95% of the fair value of Oracle stock as of the end of the semi-annual option...

  • Page 117
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 The provision for income taxes consisted of the following: (Dollars in millions) 2009 Year Ended May 31, 2008 2007 Current provision: Federal State Foreign Total current provision Deferred ...

  • Page 118
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 The components of the deferred tax assets and liabilities consist of the following: (in millions) 2009 May 31, 2008 Deferred tax liabilities: Unrealized gain on stock Unremitted earnings of ...

  • Page 119
    ...next 12 months, related primarily to transfer pricing and a technical matter of corporate restructuring, which would be affected by the possible passage of favorable legislation. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to...

  • Page 120
    ... and applications software at our data center facilities, select partner data centers or customer facilities. Advanced Customer Services consists of solution lifecycle management services, database and application management services, industry-specific solution support centers and remote and on-site...

  • Page 121
    ... of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 The following table presents a summary of our businesses' and operating segments' results: (in millions) 2009 Year Ended May 31, 2008 2007 New software licenses: Revenues(1) Sales and distribution...

  • Page 122
    ... Total margin for reportable segments Software license updates and product support revenues(1) Product development and information technology expenses Marketing and partner program expenses Corporate and general and administrative expenses Amortization of intangible assets Acquisition related...

  • Page 123
    ... the dilutive effect of outstanding stock awards and shares issuable under the employee stock purchase plan using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share: (in millions, except per share data) 2009 Year Ended May 31, 2008 2007...

  • Page 124
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2009 created in connection with a book regarding our Chief Executive Officer. The court then denied defendants' motion for summary judgment and plaintiffs' motion for summary judgment against our ...

  • Page 125
    ... with prospective economic advantage. Oracle alleged that SAP unlawfully accessed Oracle's Customer Connection support website and improperly took and used Oracle's intellectual property, including software code and knowledge management solutions. The complaint seeks unspecified damages and...

  • Page 126
    Table of Contents SCHEDULE II ORACLE CORPORATION VALUATION AND QUALIFYING ACCOUNTS Beginning Balance Additions Charged to Operations or Other Accounts Translation Adjustments Ending Balance (in millions) Write-offs Trade Receivable Allowances Year Ended: May 31, 2007 May 31, 2008 May 31, 2009 $...

  • Page 127
    ... Financial Officer (Principal Financial Officer) Senior Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) Chairman of the Board of Directors June 29, 2009 June 29, 2009 June 29, 2009 June 29, 2009 June 29, 2009 June 29, 2009 June 29, 2009 June 29, 2009...

  • Page 128
    Donald L. Lucas /s/ CHARLES E. PHILLIPS, JR. Charles E. Phillips, Jr. /s/ NAOMI O. SELIGMAN Naomi O. Seligman Director June 29, 2009 President and Director June 29, 2009 119 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Researchâ„

  • Page 129
    ... 4.02 4.03 4.04 4.05 4.06 Agreement and Plan of 8-K 000-22369 Merger, dated January 16, 2008, among Oracle Corporation, BEA Systems, Inc. and Bronco Acquisition Corporation Agreement and Plan of 8-K 000-15086 Merger, dated April 19, 2009, among Oracle Corporation, Sun Microsystems, Inc. and Soda...

  • Page 130
    ... Corporation Employee Stock Purchase Plan (1992), as amended and restated as of February 8, 2005 8-K 000-51788 4.09 4/8/08 Oracle Corporation 10-Q 000-51788 10.01 3/23/09 Oracle Corporation 10-Q 000-14376 10.01 9/28/05 Oracle Systems Corporation 120 Source: ORACLE CORP, 10-K, June 29, 2009...

  • Page 131
    ... Form of Stock Option Agreements for the Amended and Restated 2000 Long-Term Equity Incentive Plan Form of Stock Option Agreement for Oracle Corporation Amended and Restated 1993 Directors' Stock Plan Form of Indemnification Agreement for Directors and Executive Officers Letter dated September 15...

  • Page 132
    Issuing and Paying Agency Agreement between Oracle Corporation and JP Morgan Chase Bank, National Association dated as of February 3, 2006 Oracle Corporation 121 Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Researchâ„

  • Page 133
    ... 000-51788 Year 2009 Executive Bonus Plan Employment Agreement of 10-Q 000-51788 Loic Le Guisquet dated November 18, 1999 $2,000,000,000 364-Day 10-Q 000-51788 Revolving Credit Agreement dated as of March 17, 2009, among Oracle Corporation and the lenders and agents named therein Consolidated Ratio...

  • Page 134
    ... "fixed charges" means the amounts resulting from the following: (a) our interest expensed, plus (b) our interest capitalized, plus (c) our estimate of the interest component of rent expense. We do not report any shares of preferred stock outstanding in our consolidated financial statements because...

  • Page 135
    ... Technology Corporation Oracle Siebel Scholars Foundation Upshot Corporation Oracle USA, Inc. MOHR Development, Inc. AdminServer International Company LLC Agile Software Corporation Appeal Virtual Machines, Inc. BEA Crossgain, Inc. BEA Systems Holding B, Inc. BEA Systems, Inc. Business Online, Inc...

  • Page 136
    ...LLC Oracle Acquisition I Corporation Oracle Acquisition II Corporation Oracle Americas Investment 2 LLC Oracle Americas Investment 3 LLC Oracle Americas Investment LLC Oracle BEA Spain Holding LLC Oracle Financial Services Software America, Inc. Oracle Financial Services Software, Inc. Oracle Global...

  • Page 137
    ....com, Inc. XQRL, Inc. Strategic Processing Corporation Monaco Acquisition Corporation Lodestar Corporation RogersGrant LLP nquire Software, Inc. Stellent, Inc. Delphi Asset Management Corporation Reliaty, Inc. Nomadic Systems, Inc. Phaos Technology Corp. Softport Systems, Inc. The 20-20 Group, Ltd...

  • Page 138
    ...Edwards World Solutions Company Pty Ltd. LODESTAR Solutions Australia Pty. Ltd. MetaSolv Australia Pty Limited Oracle Australia Holdings Pty. Ltd. Oracle Consolidation Australia Pty. Ltd. Oracle Corporation Australia Pty. Limited Oracle Superannuation Pty Limited PeopleSoft Australia Pty. Ltd Portal...

  • Page 139
    ... Sistemas Limitada PSFT (BVI) Holding Corporation PeopleSoft China Holding Corporation BEA Systems, Ltd. i-flex Solutions Inc. (Canada) Oracle Canada Holdings Inc. Oracle Corporation Canada Inc. Oracle Numetrix Company Star Acquisition ULC Steltor Corporation Steltor General Partnership Steltor Inc...

  • Page 140
    ... GmbH Oracle Deutschland GmbH Oracle Financial Services Software S.A. Oracle Hellas, S.A. BEA Systems Hong Kong Ltd. Hyperion Solutions (Hong Kong) Ltd. MetaSolv Hong Kong Ltd. Oracle Hong Kong Holdings Limited Oracle Systems Hong Kong Limited PeopleSoft Hong Kong Ltd. Portal Software (Asia...

  • Page 141
    ...Financial Services Software Limited Oracle India Private Limited Oracle Solution Services (India) Private Ltd. PeopleSoft India Private Ltd. Portal Information Technology India Private Limited ProfitLogic Software Private Limited Siebel Systems Software (India) Private Limited Sunday Bazaar Internet...

  • Page 142
    ... BEA Systems Distribution B.V. edocs Europe Netherlands BV G-Log BV Oracle Corporation UK Finance B.V. Oracle Distribution B.V. Oracle East Central Europe Services B.V. Oracle Financial Services Software B.V. Oracle Licensing B.V. Oracle Nederland B.V. Oracle Scheduler B.V. PeopleSoft International...

  • Page 143
    .... Hyperion Software Pte. Ltd. Hyperion Solutions Asia Pty. Ltd. J.D. Edwards (Asia Pacific) Pte. Ltd. Mantas Singapore Pte. Ltd. Oracle Corporation (Singapore) Holdings Pte. Ltd. Oracle Corporation Singapore Pte. Ltd. Oracle Financial Services Consulting Pte. Ltd. Oracle Financial Services Software...

  • Page 144
    ... Software GmbH Oracle GmbH Agile Software Limited (Taiwan) J.D. Edwards (Taiwan) Pte. Ltd. PeopleSoft Taiwan Ltd. Co. BEA Systems (Thailand) Limited Oracle Corporation (Thailand) Company Limited Oracle Bilgisayar Sistemleri Limited Sirketi PeopleSoft Middle East FZ-LLC Siebel Systems Middle East...

  • Page 145
    ...Corporation UK Holdings Limited Oracle Corporation UK Limited Oracle Corporation UK Trustee Company Limited Oracle EMEA Management Pertmaster Limited Plumtree Portal Software Limited Portal Software (Europe) Limited Primavera UK Acquisition Limited Retek Information Systems Limited Siebel Systems UK...

  • Page 146
    ... Share Compensation Plan, nQuire Software, Inc. 1997 Employee Stock Option and Compensation Plan, OnLink Technologies, Inc. 1998 Stock Plan, OnTarget, Inc. 1999 Stock Award Plan, OpenSite Technologies, Inc. 1998 Stock Option Plan, Sales.Com, Inc. 1999 Equity Incentive Plan, Options Granted Outside...

  • Page 147
    ... 1997 Nonstatutory Stock Option Plan, Oracle Corporation 1993 Deferred Compensation Plan, Oracle Corporation 401(k) Savings and Investment Plan Form S-3 333-142796 of our reports dated June 29, 2009, with respect to the consolidated financial statements and schedule of Oracle Corporation, and the...

  • Page 148
    ... or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ LAWRENCE J. ELLISON Lawrence J. Ellison Chief Executive Officer and Director b) Date: June 29, 2009 Source: ORACLE CORP, 10-K, June 29...

  • Page 149
    ...'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Finance and Audit Committee of the registrant's board of directors (or persons performing the equivalent functions): a) all...

  • Page 150
    ... condition and results of operations of Oracle Corporation. Date: June 29, 2009 By: /s/ LAWRENCE J. ELLISON Lawrence J. Ellison Chief Executive Officer and Director By: /s/ JEFF EPSTEIN Jeff Epstein Executive Vice President and Chief Financial Officer _____ Created by Morningstar® Document...