Oracle 2010 Annual Report Download - page 32

Table of Contents
We continually focus on improving our cost structure by hiring personnel in countries where advanced technical expertise is available at lower costs. When we
make adjustments to our workforce, we may incur expenses associated with workforce reductions that delay the benefit of a more efficient workforce structure.
We may also experience increased competition for employees in these countries as the trend toward globalization continues, which may affect our employee
retention efforts and increase our expenses in an effort to offer a competitive compensation program. Our compensation program includes stock options, which
are an important tool in attracting and retaining employees in our industry. If our stock price performs poorly, it may adversely affect our ability to retain or
attract employees. In addition, because we expense all stock-based compensation, we may in the future change our stock-based and other compensation practices.
Some of the changes we consider from time to time include a reduction in the number of employees granted options, a reduction in the number of options granted
per employee and a change to alternative forms of stock-based compensation. Any changes in our compensation practices or changes made by competitors could
affect our ability to retain and motivate existing personnel and recruit new personnel.
Our sales to government clients subject us to risks including early termination, audits, investigations, sanctions and penalties. We derive revenues from
contracts with the U.S. government, state and local governments and their respective agencies, which may terminate most of these contracts at any time, without
cause. There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. Our federal government
contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. Similarly, our contracts at
the state and local levels are subject to government funding authorizations. Additionally, government contracts are generally subject to audits and investigations
which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received,
forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.
We may need to change our pricing models to compete successfully. The intense competition we face in the sales of our products and services and general
economic and business conditions can put pressure on us to change our prices. If our competitors offer deep discounts on certain products or services or develop
products that the marketplace considers more valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such
changes may reduce margins and could adversely affect operating results. Our software license updates and product support fees and hardware systems support
fees are generally priced as a percentage of our net new software license fees and net new hardware systems products fees, respectively. Our competitors may
offer lower pricing on their support offerings, which could put pressure on us to further discount our new license prices.
Any broad-based change to our prices and pricing policies could cause our revenues to decline or be delayed as our sales force implements and our customers
adjust to the new pricing policies. Some of our competitors may bundle products for promotional purposes or as a long-term pricing strategy or provide
guarantees of prices and product implementations. These practices could, over time, significantly constrain the prices that we can charge for certain of our
products. If we do not adapt our pricing models to reflect changes in customer use of our products or changes in customer demand, our revenues could decrease.
Additionally, increased distribution of applications through application service providers, including SaaS providers, may reduce the average price for our
products or adversely affect other sales of our products, reducing our revenues unless we can offset price reductions with volume increases. The increase in open
source software distribution may also cause us to change our pricing models.
Our periodic workforce restructurings can be disruptive. We have in the past restructured or made other adjustments to our workforce, including our direct
sales force on which we rely heavily, in response to management changes, product changes, performance issues, acquisitions and other internal and external
considerations. In the past, sales force and other restructurings have generally resulted in a temporary lack of focus and reduced productivity. These effects could
recur in connection with future acquisitions and other restructurings and our revenues could be negatively affected.
We might experience significant errors or security flaws in our software products and services. Despite testing prior to their release, software products
frequently contain errors or security flaws, especially when first introduced or when new versions are released. The detection and correction of any security flaws
can be time
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠