Oracle 2010 Annual Report Download - page 24

Table of Contents
Item 1A. Risk Factors
We operate in a rapidly changing economic and technological environment that presents numerous risks, many of which are driven by factors that we cannot
control or predict. The following discussion, as well as our “Critical Accounting Policies and Estimates” discussion in Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Item 7), highlights some of these risks. The risks described below are not exhaustive and you should carefully
consider these risks and uncertainties before investing in our securities.
Economic, political and market conditions, including the recent recession and global economic crisis, can adversely affect our business, results of operations
and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. Our business is influenced by
a range of factors that are beyond our control and that we have no comparative advantage in forecasting. These include:
• general economic and business conditions;
• the overall demand for enterprise software, hardware systems and services;
• governmental budgetary constraints or shifts in government spending priorities;
• general political developments; and
• currency exchange rate fluctuations.
Macroeconomic developments like the recent recessions in the U.S. and Europe and the debt crisis in certain countries in the European Union could negatively
affect our business, operating results or financial condition which, in turn, could adversely affect our stock price. A general weakening of, and related declining
corporate confidence in, the global economy or the curtailment in government or corporate spending could cause current or potential customers to reduce their
information technology (IT) budgets or be unable to fund software, hardware systems or services purchases, which could cause customers to delay, decrease or
cancel purchases of our products and services or cause customers not to pay us or to delay paying us for previously purchased products and services.
In addition, political unrest in regions like the Middle East, terrorist attacks around the globe and the potential for other hostilities in various parts of the world,
potential public health crises and natural disasters, including the earthquake and resulting tsunami in Japan, continue to contribute to a climate of economic and
political uncertainty that could adversely affect our results of operations and financial condition, including our revenue growth and profitability. These factors
generally have the strongest effect on our sales of new software licenses, hardware systems products, hardware systems support and related services and, to a
lesser extent, also may affect our renewal rates for software license updates and product support.
We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other factors. Our revenues, and particularly our new software license
revenues and hardware systems products revenues, are difficult to forecast, and, as a result, our quarterly operating results can fluctuate substantially. Our limited
experience with managing our new hardware business and forecasting its future financial results creates additional challenges with our forecasting processes.
We use a “pipeline” system, a common industry practice, to forecast sales and trends in our business. Our sales personnel monitor the status of all proposals and
estimate when a customer will make a purchase decision and the dollar amount of the sale. These estimates are aggregated periodically to generate a sales
pipeline. Our pipeline estimates can prove to be unreliable both in a particular quarter and over a longer period of time, in part because the “conversion rate” or
“closure rate” of the pipeline into contracts can be very difficult to estimate. A contraction in the conversion rate, or in the pipeline itself, could cause us to plan
or budget incorrectly and adversely affect our business or results of operations. In particular, a slowdown in IT spending or economic conditions generally can
unexpectedly reduce the conversion rate in particular periods as purchasing decisions are delayed, reduced in amount or cancelled. The conversion rate can also
be affected by the tendency of some of our customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms, which can also
impede our ability to negotiate, execute and deliver upon these contracts in a timely manner. In addition, for newly acquired companies, we have limited ability
to predict how their pipelines will convert into sales or
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠