Oracle 2011 Annual Report Download - page 61

Hardware Systems Products: Hardware systems products revenues are primarily generated from the sales of
our computer server and storage products. We market and sell our hardware systems products through our direct
sales force and indirect channels such as independent distributors and value added resellers. Operating expenses
associated with our hardware systems products include the cost of hardware systems products, which consist of
expenses for materials and labor used to produce these products by our internal manufacturing operations or by
third party manufacturers, warranty expenses and the impact of periodic changes in inventory valuation,
including the impact of inventory determined to be excess and obsolete. Operating expenses associated with our
hardware systems products also include sales and marketing expenses, which are largely personnel related and
include variable compensation earned by our sales force for the sales of our hardware products, and amortization
of intangible assets.
Year Ended May 31,
Percent Change Percent Change
(Dollars in millions) 2011 Actual Constant 2010 Actual Constant 2009
Hardware Systems Products Revenues:
Americas .......................... $2,248 201% 199% $ 747 * * $ —
EMEA ............................ 1,337 176% 165% 485 * * —
Asia Pacific ........................ 797 191% 173% 274 * * —
Total revenues ................. 4,382 191% 184% 1,506 * * —
Expenses:
Hardware systems products(1) .......... 2,055 134% 126% 877 * * —
Sales and marketing(1) ................ 1,037 203% 194% 342 * * —
Stock-based compensation ............ 5 4% 4% 5 * * —
Amortization of intangible assets(2) ..... 426 164% 164% 162 * * —
Total expenses ................. 3,523 154% 146% 1,386 * * —
Total Margin ...................... $ 859 634% 732% $ 120 * * $ —
Total Margin % .................... 20% 8% *
% Revenues by Geography:
Americas .......................... 51% 50% *
EMEA ............................ 31% 32% *
Asia Pacific ........................ 18% 18% *
(1) Excluding stock-based compensation
(2) Included as a component of ‘Amortization of Intangible Assets’ in our consolidated statements of operations
* Not meaningful
Fiscal 2011 Compared to Fiscal 2010: The increases in hardware systems products revenues, expenses and
total margin for fiscal 2011 were primarily attributable to the impact of Sun’s contributions to our operating
results for the full fiscal 2011 period as compared to fiscal 2010, which included Sun’s contribution to our
operating results for only a portion of the period. In fiscal 2010, our hardware systems products expenses and
total margin were unfavorably impacted by $29 million of fair value adjustments made pursuant to business
combination accounting rules for inventories we assumed from Sun and sold to customers in the post-
combination period. Excluding the effect of currency rate fluctuations, total hardware systems products margin
and margin as a percentage of total revenues increased as our total revenues increased at a faster rate than our
total expenses.
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