Oracle 2011 Annual Report Download - page 42

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designed to provide comprehensive software and hardware management and maintenance services for customers
hosted at our Oracle data center facilities, select partner data centers or physically on-site at customer facilities.
Advanced Customer Services provides support services, both onsite and remote, to Oracle customers to enable
increased performance and higher availability of their products and services. We believe that our Cloud Services
offerings provide our customers with increased business performance, reduced risk, a predictable cost and more
flexibility and choice in terms of service in order to maximize the performance of their Oracle software and
hardware products and services. While we have grown the base of customers that purchase certain of our Cloud
Services through our organic growth and the acquisition of Sun, we continue to focus on managing our expenses
to increase our margins and margins as a percentage of our revenues. We have made and plan to continue to
make investments in our Cloud Services businesses to support current and future revenue growth, which
historically has negatively impacted Cloud Services margins and could do so in the future.
Education: The purpose of our education services is to further the adoption and usage of our software and
hardware products by our customers and to create opportunities to grow our product revenues. Education
revenues are impacted by certain of our acquisitions, general economic conditions, personnel reductions in our
customers’ information technology departments, tighter controls over discretionary spending and greater use of
outsourcing solutions.
Acquisitions
An active acquisition program is another important element of our corporate strategy. In recent years, we have
invested billions of dollars to acquire a number of complementary companies, products, services and
technologies including Art Technology Group, Inc. (ATG) and Phase Forward Incorporated (Phase Forward) in
fiscal 2011 and Sun in fiscal 2010, among others. We believe our acquisition program strengthens our
competitive position, enhances the products and services that we can offer to customers, expands our customer
base, provides greater scale to accelerate innovation, grows our revenues and earnings, and increases stockholder
value. We expect to continue to acquire companies, products, services and technologies in furtherance of our
corporate strategy. See Note 2 of Notes to Consolidated Financial Statements included elsewhere in this Annual
Report for additional information related to our recent acquisitions.
We believe we can fund our pending and future acquisitions with our internally available cash, cash equivalents
and marketable securities, cash generated from operations, additional borrowings or from the issuance of
additional securities. We estimate the financial impact of any potential acquisition with regard to earnings,
operating margin, cash flow and return on invested capital targets before deciding to move forward with an
acquisition.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting
principles (GAAP) as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards
Codification (Codification) and consider the various staff accounting bulletins and other applicable guidance
issued by the SEC. GAAP, as set forth within the Codification, requires us to make certain estimates, judgments
and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable
based upon information available to us at the time that these estimates, judgments and assumptions are made.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the
date of the financial statements as well as the reported amounts of revenues and expenses during the periods
presented. To the extent there are material differences between these estimates, judgments or assumptions and
actual results, our financial statements will be affected. The accounting policies that reflect our more significant
estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding
and evaluating our reported financial results include the following:
• Revenue Recognition
• Business Combinations
• Goodwill and Intangible Assets—Impairment Assessments
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