Oracle 2011 Annual Report Download - page 33

Oracle’s brand and future business prospects in the event of system failures, inadequate disaster
recovery or loss or misappropriation of customer confidential information;
• we may face regulatory exposure in certain areas such as data privacy, data security and export
compliance;
• the laws and regulations applicable to hosted service providers are unsettled, particularly in the areas of
privacy and security and use of global resources; changes in these laws could affect our ability to
provide services from or to some locations and could increase both the costs and risks associated with
providing the services;
• demand for these services may not meet our expectations and may be affected by customer and media
concerns about security risks, international transfers of data, government or other third party access to
data, and/or use of outsourced services providers more generally; and
• our offerings may require large fixed costs for data centers, computers, network infrastructure, security
and otherwise, and we may not be able to generate sufficient revenues to offset these costs and generate
acceptable operating margins from these offerings.
Charges to earnings resulting from acquisitions may adversely affect our operating results. Under business
combination accounting standards pursuant to ASC 805, Business Combinations, we recognize the identifiable
assets acquired, the liabilities assumed, and any non-controlling interests in acquired companies generally at their
acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is
measured as the excess amount of consideration transferred, which is also generally measured at fair value, and
the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Our
estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain.
After we complete an acquisition, the following factors could result in material charges and adversely affect our
operating results and may adversely affect our cash flows:
• costs incurred to combine the operations of companies we acquire, such as transitional employee
expenses and employee retention, redeployment or relocation expenses;
• impairment of goodwill or intangible assets;
• amortization of intangible assets acquired;
• a reduction in the useful lives of intangible assets acquired;
• identification of or changes to assumed contingent liabilities, both income tax and non-income tax
related, after our final determination of the amounts for these contingencies or the conclusion of the
measurement period (generally up to one year from the acquisition date), whichever comes first;
• charges to our operating results to eliminate certain duplicative pre-merger activities, to restructure our
operations or to reduce our cost structure;
• charges to our operating results resulting from expenses incurred to effect the acquisition; and
• charges to our operating results due to the expensing of certain stock awards assumed in an acquisition.
Substantially all of these costs will be accounted for as expenses that will decrease our net income and earnings
per share for the periods in which those costs are incurred. Charges to our operating results in any given period
could differ substantially from other periods based on the timing and size of our future acquisitions and the extent
of integration activities. A more detailed discussion of our accounting for these and other items is presented in
the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial
Condition and Results of Operations (Item 7).
Environmental laws and regulations subject us to a number of risks and could result in significant liabilities
and costs. Some of our hardware systems operations are subject to state, federal and international laws
governing protection of the environment, proper handling and disposal of materials used to manufacture our
products, human health and safety, and regulating the use of certain chemical substances. We endeavor to comply
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