Oracle 2010 Annual Report Download - page 57

Table of Contents
Fiscal 2010 Compared to Fiscal 2009: On a constant currency basis, total revenues increased in fiscal 2010 due to an estimated $2.8 billion revenue
contribution from Sun, primarily in our hardware systems business, and an increase in our total software revenues resulting from growth in our new software
licenses revenues and our software license updates and product support revenues. These increases were partially offset by a constant currency decrease in our
total services revenues that we believe was caused by weaker demand for IT services due to the deterioration in global economic conditions. Excluding the effect
of currency rate fluctuations, the Americas contributed 55%, EMEA contributed 32% and APAC contributed 13% to our total revenues growth in fiscal 2010.
Excluding the unfavorable effect of currency rate fluctuations, the increase in total operating expenses in fiscal 2010 was due to additional operating expenses
incurred as a result of our acquisition of Sun and were of a similar nature as those noted in the fiscal 2011 compared to fiscal 2010 discussion above. In addition,
we also incurred increased restructuring expenses resulting from our Sun Restructuring Plan and legacy Oracle-based restructuring plans. These increases were
partially offset by expense reductions in our legacy Oracle-based operations including expense reductions in our services business, reductions in bad debt
expenses due to improved collections and reductions to travel expenses due to cost management initiatives.
On a constant currency basis, our operating margin increased during fiscal 2010 due to higher revenues from our software business, partially offset by
post-combination operating losses from Sun that related to amortization of intangible assets, acquisition related and other expenses and restructuring expenses.
Our operating margin as a percentage of revenues declined in fiscal 2010 due to the aforementioned post-combination expense contributions from Sun.
Supplemental Disclosure Related to Certain Charges
To supplement our consolidated financial information we believe the following information is helpful to an overall understanding of our past financial
performance and prospects for the future. You should review the introduction under “Impact of Acquisitions” (above) for a discussion of the inherent limitations
in comparing pre- and post-acquisition information.
Our operating results include the following business combination accounting adjustments and expenses related to acquisitions as well as certain other significant
expense items:
Year Ended May 31,
(in millions) 2011 2010 2009
Software license updates and product support deferred revenues(1) $ 80 $ 86 $ 243
Hardware systems support deferred revenues(1) 148 128 —
Hardware systems products expenses(2) — 29 —
Amortization of intangible assets(3) 2,428 1,973 1,713
Acquisition related and other(4)(6) 208 154 117
Restructuring(5) 487 622 117
Stock-based compensation(6) 500 421 340
Income tax effects(7) (1,003) (1,054) (730)
$ 2,848 $ 2,359 $ 1,800
(1) In connection with purchase price allocations related to our acquisitions, we have estimated the fair values of the software support and hardware systems support obligations assumed. Due
to our application of business combination accounting rules, we did not recognize software license updates and product support revenues related to support contracts that would have
otherwise been recorded by the acquired businesses as independent entities, in the amounts of $80 million, $86 million and $243 million in fiscal 2011, fiscal 2010 and fiscal 2009,
respectively. In addition, we did not recognize hardware systems support revenues related to hardware systems support contracts that would have otherwise been recorded by Sun as an
independent entity in the amounts of $148 million and $128 million for fiscal 2011 and 2010, respectively.
Approximately $29 million, $9 million and $2 million of estimated software license updates and product support revenues related to support contracts assumed will not be recognized
during fiscal 2012, 2013 and 2014, respectively, that would have otherwise been recognized by the acquired businesses as independent entities due to the application of these business
combination accounting rules. In addition, approximately $30 million and $11 million of estimated hardware systems support revenues related to hardware systems
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠