Oracle 2008 Annual Report Download - page 28

Table of Contents
pricing is currently being reviewed by the IRS and by foreign tax jurisdictions and will likely be subject to
additional audits in the future. We previously negotiated three unilateral Advance Pricing Agreements with
the IRS that cover many of our intercompany transfer pricing issues and preclude the IRS from making a
transfer pricing adjustment within the scope of these agreements. These agreements are effective for fiscal
years through May 31, 2006. We have submitted to the IRS a request for renewal of this Advance Pricing
Agreement for the years ending May 31, 2007 through May 31, 2011. However, these agreements do not
cover all elements of our transfer pricing and do not bind tax authorities outside the United States. We have
finalized one bilateral Advance Pricing Agreement, which was effective for the years ending May 31, 2002
through May 31, 2006 and we have submitted a renewal for the years ending May 31, 2007 through May 31,
2011. There can be no guarantee that such negotiations will result in an agreement. During the fiscal year
ended May 31, 2009, we concluded an additional bilateral agreement to cover the period from June 1, 2001
through January 25, 2008.
Although we believe that our tax estimates are reasonable, there is no assurance that the final determination of
tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions
and accruals.
We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property
and goods and services taxes, in both the United States and various foreign jurisdictions. We are regularly
under audit by tax authorities with respect to these non-income based taxes and may have exposure to
additional non-income based tax liabilities. Our acquisition activities have increased our non-income based
tax exposures.
Oracle On Demand and CRM On Demand may not be successful. We offer Oracle On Demand
outsourcing services for our 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. These business models continue to evolve, and we may not be able to compete effectively, generate
significant revenues, develop them into profitable businesses or maintain their profitability. We incur
expenses associated with the infrastructures and marketing of our Oracle On Demand and CRM On Demand
businesses in advance of our ability to recognize the revenues associated with these offerings. These
businesses are subject to a variety of additional risks, including:
• we manage critical customer applications, data and other confidential information through Oracle On
Demand and CRM On Demand; accordingly, we face increased exposure to significant damage claims
and risk to Oracle’s brand and future business prospects in the event of system failures, inadequate
disaster recovery or loss or misappropriation of customer confidential information;
• we may face regulatory exposure in certain areas such as data privacy, data security and export
compliance;
• the laws and regulations applicable to hosted service providers are unsettled, particularly in the areas of
privacy and security and use of global resources; changes in these laws could affect our ability to
provide services from or to some locations and could increase both the costs and risks associated with
providing the services;
• demand for these services may not meet our expectations and may be affected by customer and media
concerns about security risks, international transfers of data, government or other third-party access to
data, and/or use of outsourced services providers more generally; and
• our offerings may require large fixed costs for data centers, computers, network infrastructure, security
and otherwise, and we may not be able to generate sufficient revenues to offset these costs and
generate acceptable operating margins from these offerings.
Our stock price could become more volatile and your investment could lose value. All of the factors
discussed in this section could affect our stock price. The timing of announcements in the public market
regarding new products, product enhancements or technological advances by our competitors or us, and any
announcements by us of acquisitions, major transactions, or management changes could also affect our stock
price. Changes in the amounts and frequency of share repurchases or dividends could adversely affect our
stock price. Our stock price is subject to speculation in the press and the analyst community, changes in
recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation
measures for our stock, our credit ratings and market trends
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Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Research℠