Oracle 2011 Annual Report Download - page 59

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,
Percent Change Percent Change
(Dollars in millions) 2011 Actual Constant 2010 Actual Constant 2009
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.
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