Oracle 2010 Annual Report Download - page 61

Table of Contents
Software License Updates and Product Support: Software license updates grant customers rights to unspecified software product upgrades and maintenance
releases issued during the support period. Product support includes internet access to technical content as well as internet and telephone access to technical
support personnel in our global support centers. Expenses associated with our software license updates and product support line of business include the cost of
providing the support services, largely personnel related expenses, and the amortization of our intangible assets associated with software support contracts and
customer relationships obtained from acquisitions.
Year Ended May 31,
2011
Percent Change
2010
Percent Change
2009
(Dollars in millions) Actual Constant Actual Constant
Software License Updates and Product Support Revenues:
Americas $ 7,963 12% 11% $ 7,100 10% 9% $ 6,462
EMEA 4,802 12% 13% 4,304 12% 12% 3,850
Asia Pacific 2,031 20% 12% 1,688 17% 9% 1,442
Total revenues 14,796 13% 12% 13,092 11% 10% 11,754
Expenses:
Software license updates and product support(1) 1,250 20% 18% 1,046 -3% -4% 1,075
Stock-based compensation 14 -20% -20% 17 29% 29% 13
Amortization of intangible assets(2) 827 -1% -1% 839 0% 0% 841
Total expenses 2,091 10% 9% 1,902 -1% -2% 1,929
Total Margin $ 12,705 14% 12% $ 11,190 14% 12% $ 9,825
Total Margin % 86% 85% 84%
% Revenues by Geography:
Americas 54% 54% 55%
EMEA 32% 33% 33%
Asia Pacific 14% 13% 12%
(1) Excluding stock-based compensation
(2) Included as a component of ‘Amortization of Intangible Assets’ in our consolidated statements of operations
Fiscal 2011 Compared to Fiscal 2010: Excluding the effect of currency rate fluctuations, software license updates and product support revenues increased in
fiscal 2011 as a result of new software licenses sold (with substantially all customers electing to purchase support contracts) during the trailing 4-quarter period,
the renewal of substantially all of the customer base eligible for renewal in the current fiscal year and incremental revenues from recent acquisitions. Excluding
the effect of currency rate fluctuations, the Americas contributed 54%, EMEA contributed 33% and Asia Pacific contributed 13% to the increase in software
license updates and product support revenues.
In reported currency, software license updates and product support revenues in fiscal 2011 included incremental revenues of $240 million from Sun through the
third quarter of fiscal 2011 (the one year anniversary of our acquisition) and $80 million from our other recently acquired companies. As a result of our
acquisitions, we recorded adjustments to reduce assumed support obligations to their estimated fair values at the acquisition dates. Due to our application of
business combination accounting rules, software license updates and product support revenues related to support contracts in the amounts of $80 million, $86
million and $243 million that would have been otherwise recorded by our acquired businesses as independent entities were not recognized in fiscal 2011, 2010
and 2009, respectively. Historically, substantially all of our customers, including customers from acquired companies, renew their software support contracts
when such contracts are eligible for renewal. To the extent these underlying support contracts are renewed, we will recognize the revenues for the full value of
these contracts over the support periods, the substantial majority of which are one year in duration.
57
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠