Oracle 2008 Annual Report Download - page 35

Table of Contents
advantage. Recently, we have grown the base of customers that have purchased our On Demand services and
to the extent we are able to continue this trend, we would expect our On Demand revenues and margins to
increase. We have made and plan to continue to make investments in our On Demand business to support
current and future revenue growth, which historically has negatively impacted On Demand margins and may
do so in the future.
Education: The purpose of our education services is to further the adoption and usage of our software
products by our customers and to create opportunities to grow our software revenues. Education revenues are
impacted by general economic conditions, personnel reductions in our customers’ information technology
departments, tighter controls over discretionary spending and greater use of outsourcing solutions. We believe
the recent global economic environment has unfavorably affected customer demand for our education
services in comparison to prior years, which has negatively impacted our revenues and margins.
Acquisitions
An active acquisition program is another important element of our corporate strategy. In recent years, we have
invested billions of dollars to acquire a number of complementary companies, products, services and
technologies.
On April 19, 2009, we entered into an Agreement and Plan of Merger (Merger Agreement) with Sun
Microsystems, Inc. (Sun), 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 into the right to receive $9.50 in cash. In addition, options to acquire Sun common stock, Sun
restricted stock unit awards and other equity-based awards denominated in shares of Sun common stock
outstanding immediately prior to the consummation 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 $7.4 billion. This transaction is subject to Sun stockholder approval, regulatory
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the applicable merger control
laws of the European Commission and other jurisdictions, and other customary closing conditions.
We believe our acquisition program supports our long-term strategic direction, strengthens our competitive
position, expands our customer base, provides greater scale to accelerate innovation, grows our revenues and
earnings, and increases stockholder value. We expect to continue to acquire companies, products, services and
technologies. See Note 2 of Notes to Consolidated Financial Statements for additional information related to
our recent acquisitions.
We believe we can fund our pending and future acquisitions with our internally available cash, cash
equivalents and marketable securities, cash generated from operations, amounts available under our existing
debt capacity, additional borrowings or from the issuance of additional securities. We estimate the financial
impact of any potential acquisition with regard to earnings, operating margin, cash flow and return on
invested capital targets before deciding to move forward with an acquisition.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting
principles (GAAP). These accounting principles require us to make certain estimates, judgments and
assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable
based upon information available to us at the time that these estimates, judgments and assumptions are made.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the
date of the financial statements as well as the reported amounts of revenues and expenses during the periods
presented. To the extent there are material differences between these estimates, judgments or assumptions and
actual results, our financial statements will be affected. The accounting policies that reflect our more
significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully
understanding and evaluating our reported financial results include the following:
• Revenue Recognition
• Business Combinations
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Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Research℠