Oracle 2011 Annual Report Download - page 24

outsourcing (BPO) as competitive alternatives to buying software and hardware, and customer interest in SaaS or
cloud and BPO solutions is increasing. Some of these competitors have greater financial or technical resources
than we do. Our competitors that offer business applications and middleware products may influence a
customer’s purchasing decision for the underlying database in an effort to persuade potential customers not to
acquire our products. We could lose customers if our competitors introduce new competitive products, add new
functionality, acquire competitive products, reduce prices or form strategic alliances with other companies.
Vendors that offer SaaS, cloud or BPO solutions may persuade our customers not to purchase our products. We
may also face increasing competition from open source software initiatives, in which competitors may provide
software and intellectual property for free. Existing or new competitors could gain sales opportunities or
customers at our expense.
Our hardware systems offerings are complex products. If we cannot successfully manage the required
processes to meet customer requirements and demand on a timely basis, the results of our hardware systems
business will suffer. Designing, developing, manufacturing and introducing new hardware systems products
are complicated processes. The development process is uncertain and requires a high level of innovation from
both systems hardware and software product designers and engineers and the suppliers of the components used in
these products. The development process is also lengthy and costly. Once a new hardware systems product is
developed, we face several challenges in the manufacturing process. We must be able to forecast customer
demand and manufacture new hardware systems products in sufficient volumes to meet this demand and do so in
a cost effective manner. Our “build-to-order” manufacturing model, in which our hardware systems products are
not fully assembled until after customers place orders, may from time to time experience delays in delivering our
hardware systems products to customers in a timely manner. These delays could cause our customers to purchase
hardware products and services from our competitors. We must also manage new hardware product introductions
and transitions to minimize the impact of customer delayed purchases of existing hardware systems products in
anticipation of new hardware systems product releases. Because the design and manufacturing processes for
components are also very complicated, it is possible that we could experience design or manufacturing flaws.
These design or manufacturing flaws could delay or prevent the production of the components for which we have
previously committed to pay or need to fulfill orders from customers. These types of component flaws could also
prevent the production of our hardware products or cause our hardware products to be returned, recalled or
rejected resulting in lost revenues, increases in warranty costs or costs related to remediation efforts, damage to
our reputation, penalties and litigation.
Acquisitions present many risks, and we may not realize the financial and strategic goals that were
contemplated at the time of a transaction. In recent years, we have invested billions of dollars to acquire a
number of companies, products, services and technologies. An active acquisition program is an important
element of our overall corporate strategy, and we expect to continue to make similar acquisitions in the future.
Risks we may face in connection with our acquisition program include:
• our ongoing business may be disrupted and our management’s attention may be diverted by
acquisition, transition or integration activities;
• an acquisition may not further our business strategy as we expected, we may not integrate an acquired
company or technology as successfully as we expected or we may overpay for, or otherwise not realize
the expected return on, our investments, which could adversely affect our business or operating results;
• we may have difficulties (i) managing an acquired company’s technologies or lines of business or
(ii) entering new markets where we have no or limited direct prior experience or where competitors
may have stronger market positions;
• our operating results or financial condition may be adversely impacted by claims or liabilities that we
assume from an acquired company or technology or that are otherwise related to an acquisition,
including claims from government agencies, terminated employees, current or former customers,
former stockholders or other third parties; pre-existing contractual relationships of an acquired
company that we would not have otherwise entered into, the termination or modification of which may
be costly or disruptive to our business; unfavorable revenue recognition or other accounting treatment
as a result of an acquired company’s practices; and intellectual property claims or disputes;
22