Oracle 2010 Annual Report Download - page 34

Table of Contents
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms
of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing
result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. Should we incur future increases
in interest expense, our ability to utilize certain of our foreign tax credits to reduce our U.S. federal income tax could be limited, which could unfavorably affect
our provision for income taxes and effective tax rate. In addition, changes by any rating agency to our outlook or credit rating could negatively affect the value of
both our debt and equity securities and increase the interest amounts we pay on outstanding or future debt. These risks could adversely affect our financial
condition and results of operations.
Adverse litigation results could affect our business. We are subject to various legal proceedings. Litigation can be lengthy, expensive and disruptive to our
operations, and results cannot be predicted with certainty. An adverse decision could result in monetary damages or injunctive relief that could affect our
business, operating results or financial condition. Additional information regarding certain of the lawsuits we are involved in is discussed under Note 18 of Notes
to Consolidated Financial Statements.
We may have exposure to additional tax liabilities. As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both
the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax
liabilities. We are regularly under audit by tax authorities and those authorities very often do not agree with positions taken by us on our tax returns.
Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate. For example, certain U.S. government proposals for
fundamental U.S. international tax reform, if enacted, could have a significant adverse impact on our effective tax rate. Further, in the ordinary course of a global
business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. Our intercompany transfer pricing is
currently being reviewed by the U.S. Internal Revenue Service (IRS) and by foreign tax jurisdictions and will likely be subject to additional audits in the future.
We have negotiated certain unilateral Advance Pricing Agreements with the IRS and certain selected bilateral Advance Pricing Agreements that cover many of
our intercompany transfer pricing issues and preclude the relevant tax authorities from making a transfer pricing adjustment within the scope of these agreements.
However, these agreements do not cover substantial elements of our transfer pricing.
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, particularly with our 2010 entry into a
new hardware systems business resulting from our acquisition of Sun, which increased the volume and complexity of laws and regulations that we are subject to
and with which we must comply.
Although we believe that our income and non-income based 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.
Our Oracle Cloud Services offerings, including Oracle CRM On Demand, may not be successful. We offer Oracle Cloud Services, which was formerly
known as Oracle On Demand, and which include outsourcing software and hardware management and maintenance services delivered at our data center
facilities, select partner data centers or customer facilities. Our Cloud Services also include certain subscription-based software offerings such as Oracle CRM On
Demand, which provides our customers with our CRM software functionality delivered via a hosted solution that we manage, among others. These business
models continue to evolve, and we may not be able to compete effectively, generate significant revenues or maintain their profitability. We incur expenses
associated with the infrastructures and marketing of our Cloud Services in advance of our ability to recognize the revenues associated with these offerings. Our
Cloud Services offerings are subject to a variety of additional risks, including:
• we manage critical customer applications, data and other confidential information through Oracle Cloud Services; accordingly, we face increased
exposure to significant damage claims and risk to
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠