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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2012
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-51788
Oracle Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
54-2185193
(I.R.S. Employer
Identification No.)
500 Oracle Parkway
Redwood City, California
(Address of principal executive offices)
(650) 506-7000
94065
(Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $0.01 per share The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES È NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES È NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). YES È NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È Accelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO È
The aggregate market value of the voting stock held by non-affiliates of the registrant was $119,072,791,000 based on the number of shares held
by non-affiliates of the registrant as of May 31, 2012, and based on the closing sale price of common stock as reported by the NASDAQ Global
Select Market on November 30, 2011, which is the last business day of the registrant’s most recently completed second fiscal quarter. This
calculation does not reflect a determination that persons are affiliates for any other purposes.
Number of shares of common stock outstanding as of June 20, 2012: 4,882,506,000.
Documents Incorporated by Reference:
Portions of the registrant’s definitive proxy statement relating to its 2012 annual stockholders’ meeting are incorporated by reference into Part III
of this Annual Report on Form 10-K where indicated.

Table of contents

  • Page 1
    ... No.) 500 Oracle Parkway Redwood City, California (Address of principal executive offices) 94065 (Zip Code) (650) 506-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which...

  • Page 2

  • Page 3
    ... YEAR 2012 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Page PART I. Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. PART II. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. PART III. Item 10. Item 11. Item 12. Item 13. Item 14. PART IV. Item 15. Exhibits and Financial Statement...

  • Page 4
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 5
    ... from those expressed or implied in the forward­looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors" included elsewhere in this Annual Report and as may be updated in filings we make from time to time with...

  • Page 6
    ..., no inference should be drawn that we will make additional updates with respect to those or other forward­looking statements. New information, future events or risks could cause the forward­looking events we discuss in this Annual Report not to occur. You should not place undue reliance on...

  • Page 7
    ... license updates and product support. Our hardware systems business consists of two operating segments: (1) hardware systems products and (2) hardware systems support. Our services business is comprised of the remainder of our operating segments and offers consulting services, managed cloud services...

  • Page 8
    ... on a subscription basis, includes access, hosting, infrastructure management, the use of software updates, and support; • Oracle Engineered Systems, which include our Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In­Memory Machine, and Oracle SPARC SuperCluster...

  • Page 9
    ... storage and operating system software with our server, storage and networking hardware. Oracle Exadata Database Machine is designed to enable customers to consolidate databases, manage large volumes of data, improve query response times, and reduce costs by improving data storage and using fewer IT...

  • Page 10
    ..., servers, storage and networking in a single box that is designed to deliver high­availability database services for a wide range of homegrown and packaged online transaction processing (OLTP) and data warehousing applications. The Oracle Database Appliance is designed to enable enterprises to...

  • Page 11
    ... unstructured data in the form of weblogs, text, social media feeds, XML files, office documents, images, video and spatial images; and other specialized forms of data, such as human genomic and medical data. Oracle Database software is used for a variety of purposes, including packaged applications...

  • Page 12
    ... areas: • Application Server and Cloud Application Foundation; • Service­Oriented Architecture and Business Process Management; • Business Intelligence; • Identity and Access Management; • Data Integration; • Web Experience Management, Portals, Content Management and Social Networks...

  • Page 13
    ... Enterprise Edition, a comprehensive query and analysis server; Oracle Essbase, an online analytical processing server; Oracle BI Publisher, a self­service production and operational reporting tool; and Oracle Real­Time Decisions, a real­time data classification and optimization solution. Users...

  • Page 14
    ... or has not been stored, including documents, images, audio, video and a wide variety of other forms of digital content. Oracle WebCenter Sites enables marketers and business users to easily create and manage contextually relevant, social and interactive online experiences across multiple channels...

  • Page 15
    ... of investments in internal research and development and strategic acquisitions, we also provide industry­specific solutions for customers in a number of different industries, including communications, engineering and construction, financial services, health services, manufacturing, public sector...

  • Page 16
    ... technologies such as role­based analytics, secure search, identity management, self­service and workflow to deliver adaptive industry processes, business intelligence and insights, and optimal end­user productivity. Oracle Fusion Applications are part of a comprehensive suite of modular, next...

  • Page 17
    ..., Oracle E­Business Suite, and Oracle Fusion Applications, among others, that support supply chain management processes such as demand management, order management, supply chain planning, sales and operations planning, procurement and sourcing to product development, manufacturing, transportation...

  • Page 18
    ... Close and Reporting; Hyperion Planning, Budgeting and Forecasting; and Hyperion Profitability and Cost Management. These applications enable organizations to define and model their financial structure, define their operating plans and manage financial budgets, allocate indirect revenues and costs...

  • Page 19
    ..., scalability, reliability, security, ease of management and lower total cost of ownership. Our hardware systems products represented 10%, 12% and 6% of our total revenues in fiscal 2012, 2011 and 2010, respectively. Servers We offer a wide range of server systems using our SPARC microprocessor...

  • Page 20
    ... operating systems without downtime. In addition to Oracle Solaris and Oracle Linux operating systems, we also develop a range of other hardware­ related software, including development tools, compilers, management tools for servers and storage, diagnostic tools, virtualization, and file systems...

  • Page 21
    ... and employees as a part of our mission of accelerating the adoption and use of our software and hardware products and to create opportunities to grow our product revenues. Our training is provided through a variety of formats, including instructor­led classes at our education centers, live virtual...

  • Page 22
    ... licenses segment) as certain expenses within our cost structure are relatively fixed in the short term. See "Selected Quarterly Financial Data" in Item 7 of this Annual Report for a more complete description of the seasonality and cyclicality of our revenues, expenses and margins. Competition...

  • Page 23
    ..., our Oracle Solaris operating system, Microsoft's Windows Server, UNIX (including HP­UX from HP and AIX from IBM) and Linux; • the adoption of open source alternatives to commercial software by enterprise software customers; • products, features and functionality developed internally by...

  • Page 24
    ... Our Annual Report on Form 10­K, Quarterly Reports on Form 10­Q, Current Reports on Form 8­K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations web site at www.oracle.com...

  • Page 25
    ... our revenue growth and profitability. These factors generally have the strongest effect on our sales of new software licenses, hardware systems products, hardware systems support and related services and, to a lesser extent, also may affect our renewal rates for software license updates and...

  • Page 26
    ... could be harmed through fewer customer orders, reduced pricing, lower revenues or lower profits. Our hardware systems business will compete with, among others, (i) systems manufacturers and resellers of systems based on our own microprocessors and operating systems and those of our competitors, (ii...

  • Page 27
    ... do so in a cost effective manner. Our "build­to­order" manufacturing model, in which our hardware systems products generally are not built 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...

  • Page 28
    ... revenues from an acquisition for a number of reasons, including if a larger than predicted number of customers decline to renew software license updates and product support contracts, hardware systems support contracts and cloud software subscription contracts, if we are unable to sell the acquired...

  • Page 29
    ...profitable Oracle Engineered Systems products like Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud and Oracle Exalytics In­Memory Machine, which are in the relatively early stages of adoption by our customers, and our de­emphasis on our lower profit margin commodity hardware systems...

  • Page 30
    ...our revenues from, and have significant operations, outside of the United States. Our international operations include software and hardware systems development, manufacturing, assembly, sales, customer support, consulting, managed cloud services and shared administrative service centers. Compliance...

  • Page 31
    ...could prevent us from shipping customer orders on time, if at all, and may result in the loss of sales and customers. We outsource the manufacturing, assembly and delivery of certain of our hardware products to a variety of companies, many of which are located outside the United States. Our reliance...

  • Page 32
    ... of operations, financial position and cash flows, the timing of which is variable and generally outside of our control. We may not be able to protect our intellectual property rights. We rely on copyright, trademark, patent and trade secret laws, confidentiality procedures, controls and contractual...

  • Page 33
    ... or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect operating results. Our software license updates and product support fees and hardware systems support fees are generally priced as a percentage of our net new software...

  • Page 34
    ... in customer sectors involving particularly sensitive data such as health sciences, financial services and the government. We also have an active acquisition program and have acquired a number of companies, products, services and technologies over the years. While we make significant efforts to...

  • Page 35
    ...versions of our software or hardware products, we could lose revenues. In addition, we run our own business operations, cloud software subscription offerings, Oracle managed cloud services and other outsourcing services, support and consulting services, on our products and networks and any flaws, if...

  • Page 36
    ... higher than anticipated in jurisdictions that have higher statutory tax rates. We are also subject to non­income based taxes, such as payroll, sales, use, value­added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions. We are regularly...

  • Page 37
    ... 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...

  • Page 38
    ... leased office facilities for sales, support, research and development, consulting, manufacturing and administrative personnel. Our headquarters facility consists of approximately 2.1 million square feet in Redwood City, California, substantially all of which we own. We lease our principal internal...

  • Page 39
    ... discontinued at any time. The following table summarizes the stock repurchase activity for the three months ended May 31, 2012 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program: Total Number of Shares Purchased Average Price Paid per Share...

  • Page 40
    ... of any dividends. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Oracle Corporation, the S&P 500 Index and the S&P Information...

  • Page 41
    ... respective dates of acquisition and have contributed to our growth in revenues, income, earnings per share and total assets. (in millions, except per share amounts) 2012 As of and for the Year Ended May 31, 2011 2010 2009 2008 Consolidated Statements of Operations Data: Total revenues ...Operating...

  • Page 42
    ...has evolved from technologies and services that Oracle has provided for many years, including clustering, server virtualization, Service­Oriented Architecture (SOA), shared services, large­scale management automation, and more recently, engineered systems. Our secure, reliable and scalable product...

  • Page 43
    ...and provide subscription­based access to select Oracle software applications and software platforms through a cloud­ based IT environment to businesses of many sizes, government agencies, educational institutions and resellers. The growth in new software license revenues that we report is affected...

  • Page 44
    ... revenues in fiscal 2012, 2011 and 2010, respectively, is our highest margin business unit. The proportion of our software license updates and product support revenues relative to our total revenues was affected by our entry into the hardware systems business as a result of our acquisition of Sun...

  • Page 45
    ... systems products revenues, expenses and operating margins that we report. Hardware Systems Support: Our hardware systems support offerings provide customers with software updates for the software components that are essential to the functionality of our server and storage products, such as Oracle...

  • Page 46
    ... of our operating segments and offers consulting services, managed cloud services and education services. Our services business, which represented 13% of our total revenues in each of fiscal 2012 and 2011 and 14% of our total revenues in fiscal 2010, has lower margins than our software and hardware...

  • Page 47
    ... software license revenues earned from granting licenses to use our software products and fees from cloud software subscription offerings, and software license updates and product support revenues; (2) hardware systems, which includes the sale of hardware systems products including computer servers...

  • Page 48
    ... to the software license. Revenue Recognition for Hardware Systems Products, Hardware Systems Related Services and Cloud Software Subscription Offerings (Nonsoftware Elements) Revenues from the sale of hardware systems products represent amounts earned primarily from the sale of computer servers and...

  • Page 49
    ...customers with software updates for the software components that are essential to the functionality of our server and storage products and can also include product repairs, maintenance services and technical support services. Hardware systems support contracts are generally priced as a percentage of...

  • Page 50
    ... services, the type of customer (i.e. distributor, value added reseller, government agency and direct end user, among others) and the stage of the product lifecycle. The determination of ESP is made through consultation with and approval by our management, taking into consideration our pricing model...

  • Page 51
    ... of revenues and related expenses reported in our consolidated financial statements. A number of internal and external factors can affect our estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Our managed cloud services are...

  • Page 52
    ... are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not limited to: • future expected cash flows from software license sales, hardware systems product sales, support agreements, consulting contracts, other customer...

  • Page 53
    We estimate the fair values of cloud software subscription, software license updates and product support and hardware systems support obligations assumed. The estimated fair values of these performance obligations are determined utilizing a cost build­up approach. The cost build­up approach ...

  • Page 54
    ... to Consolidated Financial Statements included elsewhere in this Annual Report. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected...

  • Page 55
    ... goodwill is measured as the excess of consideration transferred over the net estimated fair values of assets acquired. Impairment charges associated with goodwill are generally not tax deductible and will result in an increased effective income tax rate in the period that any impairment is recorded...

  • Page 56
    ...of employee groups by seniority of job classification. Our expected dividend rate is based upon an annualized dividend yield based on the per share dividend declared by our Board of Directors. The aforementioned inputs entered into the option valuation model we use to fair value our stock awards are...

  • Page 57
    ...of our acquired products to the growth in new software license revenues, software license updates and product support revenues, hardware systems products revenues (as applicable) and hardware systems support revenues (as applicable) for the one year period subsequent to the acquisition date. We also...

  • Page 58
    ... our prior fiscal year) rather than the actual exchange rates in effect during the respective periods. For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on May 31, 2012 and May 31, 2011, our financial statements would reflect reported revenues of $1.25...

  • Page 59
    ... revenues growth. Excluding the effect of foreign currency rate fluctuations, the increase in total operating expenses in fiscal 2011 was due to a full year of expense contributions from Sun to our fiscal 2011 operating results, including increased expenses pertaining to hardware systems products...

  • Page 60
    ...) 2012 Year Ended May 31, 2011 2010 New software licenses deferred revenues(1) ...Software license updates and product support deferred revenues(1) ...Hardware systems support deferred revenues(1) ...Hardware systems products expenses(2) ...Amortization of intangible assets(3) ...Acquisition...

  • Page 61
    ...Annual Report. Stock­based compensation was included in the following operating expense line items of our consolidated statements of operations (in millions): Year Ended May 31, 2012 Sales and marketing ...Software license updates and product support ...Hardware systems products ...Hardware systems...

  • Page 62
    ... stock­based compensation Included as a component of 'Amortization of Intangible Assets' in our consolidated statements of operations Fiscal 2012 Compared to Fiscal 2011: Excluding the effect of foreign currency rate fluctuations, total new software license revenues increased by 8% in fiscal 2012...

  • Page 63
    ...or greater increased by 4% in fiscal 2012 and represented 27% of our new software license revenues in fiscal 2012 in comparison to 28% in fiscal 2011. Excluding the effect of currency rate fluctuations, our total new software license expenses increased in fiscal 2012 primarily due to higher employee...

  • Page 64
    ...% Excluding stock­based compensation Included as a component of 'Amortization of Intangible Assets' in our consolidated statements of operations Fiscal 2012 Compared to Fiscal 2011: Excluding the effect of currency rate fluctuations, software license updates and product support revenues increased...

  • Page 65
    ... value added resellers. Operating expenses associated with our hardware systems products include the cost of hardware systems products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third party manufacturers, warranty...

  • Page 66
    ... slowed purchases of predecessor server products. These hardware revenue decreases were partially offset by increases in hardware revenues attributable to our Oracle Engineered Systems during fiscal 2012. Excluding the effects of currency rate fluctuations, total hardware systems products operating...

  • Page 67
    ... the reduction of service delivery costs during fiscal 2012 resulting from our integration initiatives associated with our acquisition of Sun. Excluding the effect of currency rate fluctuations, total hardware systems support margin and margin as a percentage of total revenues increased as a result...

  • Page 68
    ... of Intangible Assets' in our consolidated statements of operations Fiscal 2012 Compared to Fiscal 2011: Excluding the effect of currency rate fluctuations, our services revenues increased modestly in fiscal 2012 due to increased consulting and managed cloud services revenues including incremental...

  • Page 69
    ... for information technology, finance, legal and human resources support functions. Year Ended May 31, Percent Change Percent Change Actual Constant 2011 Actual Constant (Dollars in millions) 2012 2010 General and administrative(1) ...$ Stock­based compensation ...Total expenses ...% of...

  • Page 70
    ... 2012 and from our acquisitions of ATG and Phase Forward in fiscal 2011, amongst others, were offset by a reduction in expenses associated with certain of our intangible assets that became fully amortized. Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report...

  • Page 71
    ... in fiscal 2012 primarily related to our Sun Restructuring Plan, which our management approved, committed to and initiated in order to better align our cost structure as a result of our acquisition of Sun. To a lesser extent, we also incurred expenses associated with other Oracle­based plans, which...

  • Page 72
    ...held to support our deferred compensation plan obligations. These unfavorable variations to non­operating income, net were partially offset by increases in interest income during fiscal 2012 due to larger average cash, cash equivalents and marketable securities balances in comparison to fiscal 2011...

  • Page 73
    ... our acquired cloud software subscription, software license updates and product support obligations and hardware systems support obligations to fair value. (Dollars in millions) 2012 Year Ended May 31, Change 2011 Change 2010 Net cash provided by operating activities ...$ 13,743 Net cash used for...

  • Page 74
    ... cash from new software license sales, sales of hardware systems products and hardware systems support arrangements and, to a lesser extent, services. Our primary uses of cash from operating activities are for employee related expenditures, material and manufacturing costs related to the production...

  • Page 75
    ... control of these financial assets. We financed $1.6 billion, $1.5 billion and $1.2 billion, respectively, or approximately 16% of our new software license revenues in each of fiscal 2012, 2011 and 2010, and $134 million and $117 million, respectively, or approximately 3% of our hardware systems...

  • Page 76
    ... 8 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report. Common Stock Repurchases: Our Board of Directors has approved a program for us to repurchase shares of our common stock. On December 20, 2011, we announced that our Board of Directors approved an expansion of...

  • Page 77
    ... obligations table above have been estimated using an interest rate of 1.39%, which represented our effective interest rate as of May 31, 2012 after consideration of these fixed to variable interest rate swap agreements, and are subject to change in future periods. The changes in fair value of...

  • Page 78
    ... of Notes to Consolidated Financial Statements included elsewhere in this Annual Report, we have contingent consideration payable as a result of our acquisition of Pillar Data Systems, Inc. that will settle in fiscal 2015. Subsequent to fiscal 2012, we agreed to acquire certain companies for amounts...

  • Page 79
    ... sought to control the number of options and restricted stock­based awards granted while providing competitive compensation packages. Consistent with these dual goals, our cumulative potential dilution since June 1, 2009 has been a weighted average annualized rate of 1.7% per year. The potential...

  • Page 80
    ... our consolidated statements of operations. We have entered into certain fixed to variable interest rate swap agreements to manage the interest rate and related fair value of our 2014 Notes so that the interest payable on the 2014 Notes effectively became variable based on LIBOR. We do not use these...

  • Page 81
    ... securities that we reported in U.S. Dollars for these subsidiaries as of May 31, 2012 decreased relative to what we would have reported using a constant currency rate as of May 31, 2011. As reported in our consolidated statements of cash flows, the estimated effect of exchange rate changes...

  • Page 82
    ... as this Annual Report on Form 10­K, is recorded, processed, summarized and reported within the time periods specified by the U.S. Securities and Exchange Commission. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including...

  • Page 83
    ... and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide...

  • Page 84
    ... Memberships During Fiscal 2012," "Board of Directors-Committees, Membership and Meetings-The Finance and Audit Committee," "Corporate Governance-Employee Matters-Code of Conduct" and "Section 16(a) Beneficial Ownership Reporting Compliance". Item 11. Executive Compensation The information required...

  • Page 85
    ... statements are filed as a part of this report: Page Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm ...Consolidated Financial Statements: Balance Sheets as of May 31, 2012 and 2011 ...Statements of Operations for the years ended May 31, 2012, 2011 and 2010 ...Statements...

  • Page 86
    ... The Board of Directors and Stockholders of Oracle Corporation We have audited the accompanying consolidated balance sheets of Oracle Corporation as of May 31, 2012 and 2011, and the related consolidated statements of operations, statements of equity, and cash flows for each of the three years in...

  • Page 87
    ... 31, 2012 and 2011, and the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended May 31, 2012 of Oracle Corporation and our report dated June 26, 2012 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP San Jose, California...

  • Page 88
    ..., except per share data) 2012 2011 ASSETS Current assets: Cash and cash equivalents ...$ Marketable securities ...Trade receivables, net of allowances for doubtful accounts of $323 and $372 as of May 31, 2012 and 2011, respectively ...Inventories ...Deferred tax assets ...Prepaid expenses and...

  • Page 89
    ORACLE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended May 31, 2012, 2011 and 2010 (in millions, except per share data) 2012 Year Ended May 31, 2011 2010 Revenues: New software licenses ...Software license updates and product support ...Software revenues ...Hardware systems ...

  • Page 90
    ...gain on marketable securities, net of tax ...Net income ...Comprehensive income ...$ Balances as of May 31, 2011 ...Common stock issued under stock­based compensation plans ...$ Common stock issued under stock purchase plans . . Assumption of stock­based compensation plan awards in connection with...

  • Page 91
    ...and vesting of restricted stock­ based awards ...Excess tax benefits on the exercise of stock options and vesting of restricted stock­based awards ...Other, net ...Changes in operating assets and liabilities, net of effects from acquisitions: Increase in trade receivables ...Decrease (increase) in...

  • Page 92
    ... TO CONSOLIDATED FINANCIAL STATEMENTS May 31, 2012 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES We develop, manufacture, market, distribute, host and support database and middleware software; applications software; and hardware systems, with the latter consisting primarily of computer server...

  • Page 93
    ... software license revenues earned from granting licenses to use our software products and fees from cloud software subscription offerings, and software license updates and product support revenues; (2) hardware systems, which includes the sale of hardware systems products including computer servers...

  • Page 94
    ... to the software license. Revenue Recognition for Hardware Systems Products, Hardware Systems Related Services and Cloud Software Subscription Offerings (Nonsoftware Elements) Revenues from the sale of hardware systems products represent amounts earned primarily from the sale of computer servers and...

  • Page 95
    ... services, the type of customer (i.e. distributor, value added reseller, government agency and direct end user, among others) and the stage of the product lifecycle. The determination of ESP is made through consultation with and approval by our management, taking into consideration our pricing model...

  • Page 96
    ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2012 support, new software licenses, software license updates and product support, cloud software subscription, consulting, managed cloud services and education. In such arrangements, we first allocate the total ...

  • Page 97
    ...). Software license agreements or sales of hardware systems that occur within a three­ month time period from the date we have purchased goods or services from that same customer are reviewed for appropriate accounting treatment and disclosure. When we acquire goods or services from a customer...

  • Page 98
    ... values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. Costs to exit or restructure certain activities of an acquired company or our internal operations are accounted for as one­time termination...

  • Page 99
    ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2012 We hold investments in certain non­marketable equity securities in which we do not have a controlling interest or significant influence. These equity securities are recorded at cost and included in other assets ...

  • Page 100
    ... excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Intangible assets that are not considered to have an indefinite useful life are amortized over their useful lives, which generally range from one to ten years. Each period we...

  • Page 101
    ...statements of operations based on their fair values and the estimated number of shares we ultimately expect will vest. We recognize stock­based compensation expense on a straight­line basis over the service period of the award, which is generally four years. We record deferred tax assets for stock...

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    ... restricted stock­based awards. (in millions) 2012 Year Ended May 31, 2011 2010 Transitional and other employee related costs ...Stock­based compensation ...Professional fees and other, net ...Business combination adjustments, net ...Total acquisition related and other expenses ...Non-Operating...

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    ...Pillar Data), a provider of enterprise storage systems solutions. Prior to the acquisition, Pillar Data was directly and indirectly majority­owned and controlled by Lawrence J. Ellison, our Chief Executive Officer, director and largest stockholder. Pursuant to the agreement and plan of merger dated...

  • Page 104
    ...and calculated in accordance with the terms of the Merger Agreement. Subsequent to the date of acquisition, the estimated fair value of the Earn­Out liability increased to $387 million as of May 31, 2012 primarily as a result of the passage of time and the corresponding impact of discounting. Other...

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    ...results of Phase Forward in our consolidated financial statements from the date of acquisition. The total purchase price for Phase Forward was approximately $736 million, which consisted of approximately $735 million in cash and $1 million for the fair value of restricted stock­based awards assumed...

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    ... in our consolidated results from their respective acquisition dates. Unaudited Pro Forma Financial Information The unaudited pro forma financial information in the table below summarizes the combined results of operations for Oracle, Taleo, RightNow, Pillar Data, ATG, Phase Forward and certain...

  • Page 107
    ... STATEMENTS-(Continued) May 31, 2012 3. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES Cash and cash equivalents primarily consist of deposits held at major banks, money market funds, Tier­1 commercial paper, U.S. Treasury obligations, U.S. government agency and government sponsored enterprise...

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    ... 31, 2012 Fair Value Measurements Using Input Types (in millions) Level 1 Level 2 Level 3 Total May 31, 2011 Fair Value Measurements Using Input Types Level 1 Level 2 Total Assets: Money market funds ...$ U.S. Treasury, U.S. government and U.S. government agency debt securities ...Commercial paper...

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    ... Amortization Intangible Assets, Net Weighted Average May 31, May 31, Useful 2011 2012 Life(1) May 31, May 31, May 31, May 31, 2011 Additions 2012 2011 Expense 2012 Software support agreements and related relationships ...$ 5,177 $ Hardware systems support agreements and related relationships...

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    ... policy, we recorded goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement period (up to one year from the date of an acquisition). The other goodwill adjustments presented in the table above were not significant to our previously reported operating...

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    ... agreement with the initial purchasers for the benefit of the holders of the Original Senior Notes in which we agreed to file with the SEC a registration statement with respect to senior notes identical in all material respects to the Original Senior Notes within fourteen months after the issue date...

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    .... The effective interest rate of our borrowing under the 2012 Credit Agreement is 0.24% at May 31, 2012. This borrowing is due on July 2, 2012, which is the termination date of the 2012 Credit Agreement. The 2012 Credit Agreement contains certain customary representations, warranties and guarantees...

  • Page 113
    ... All Plans Fiscal 2012 Activity (in millions) Accrued May 31, 2011(2) Initial Costs(3) Year Ended May 31, 2012 Adj. to Cash Cost(4) Payments Others(5) Accrued May 31, 2012(2) Sun Restructuring Plan(1) New software licenses ...Software license updates and product support ...Hardware systems business...

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    ... fiscal year impact to our consolidated statements of operations was not significant. (2) (3) (4) (5) (6) 10. DEFERRED REVENUES Deferred revenues consisted of the following: May 31, (in millions) 2012 2011 Software license updates and product support ...$ Hardware systems support ...Services...

  • Page 115
    ... with our acquisitions, we have estimated the fair values of the cloud software subscription, software license updates and product support and hardware systems support obligations assumed from our acquired companies. We have estimated the fair values of the obligations assumed using a cost build­up...

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    ... in fair values of these forward contracts is non­operating income (expense), net, for both realized and unrealized gains and losses. As of May 31, 2012 and 2011, respectively, the notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other major international...

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    ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2012 12. COMMITMENTS AND CONTINGENCIES Lease Commitments We lease certain facilities, furniture and equipment under operating leases. As of May 31, 2012, future minimum annual operating lease payments and future ...

  • Page 118
    ...be effected from time to time through open market purchases or pursuant to a Rule 10b5­1 plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time. Dividends on Common Stock During fiscal 2012, 2011 and 2010, our Board of Directors declared cash dividends...

  • Page 119
    ... Plan, options to purchase common stock are granted at not less than fair market value, become exercisable as established by the Board (generally 25% annually over four years under our current practice) and generally expire no more than ten years from the date of grant. As of May 31, 2012, options...

  • Page 120
    ... value was calculated based on the gross difference between our closing stock price on the last trading day of fiscal 2012 of $26.47 and the exercise prices for all "in­the­money" options outstanding, excluding tax effects. The unrecognized compensation expense calculated under the fair value...

  • Page 121
    ...­based compensation is included in the following operating expense line items in our consolidated statements of operations: (in millions) 2012 Year Ended May 31, 2011 2010 Sales and marketing ...$ Software license updates and product support ...Hardware systems products ...Hardware systems support...

  • Page 122
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2012 Employee Stock Purchase Plan We have an Employee Stock Purchase Plan (Purchase Plan) that allows employees to purchase shares of common stock at a price per share that is 95% of the fair market value of Oracle stock as of...

  • Page 123
    ... before provision for income taxes as follows: (in millions) 2012 Year Ended May 31, 2011 2010 Tax provision at statutory rate ...$ 4,537 $ 3,994 $ 2,885 Foreign earnings at other than United States rates ...(1,474) (1,125) (672) State tax expense, net of federal benefit ...171 188 161 Settlements...

  • Page 124
    ...31, (in millions) 2012 2011 Deferred tax liabilities: Unrealized gain on stock ...Acquired intangible assets ...Unremitted earnings ...Total deferred tax liabilities ...Deferred tax assets: Accruals and allowances ...Employee compensation and benefits ...Differences in timing of revenue recognition...

  • Page 125
    ...unrecognized benefits would affect our effective tax rate if recognized. We recognized interest and penalties related to uncertain tax positions in our provision for income taxes line of our consolidated statements of operations of $46 million, $22 million and $3 million during fiscal 2012, 2011 and...

  • Page 126
    ... server and cloud application software; Service­Oriented Architecture and business process management software; business intelligence software; identity and access management software; data integration software; web experience management, portals, content management and social network software...

  • Page 127
    ...Oracle Linux and certain other operating systems environments. Our storage products are designed to securely manage, protect, archive and restore customers' data assets and consist of tape, disk and networking solutions for open systems and mainframe server environments. Our hardware systems support...

  • Page 128
    ... accompanying consolidated statements of operations in the amount of $22 million for fiscal 2012. Software license updates and product support revenues for management reporting included revenues related to software support contracts that would have otherwise been recorded by the acquired businesses...

  • Page 129
    ... before provision for income taxes: (in millions) 2012 Year Ended May 31, 2011 2010 Total revenues for operating segments ...$ New software licenses revenues(1) ...Software license updates and product support revenues(1) ...Hardware systems support revenues(1) ...Total revenues ...$ 37,221 $ (22...

  • Page 130
    ... stock options, restricted stock­based awards and shares issuable under the employee stock purchase plan using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share: (in millions, except per share data) Year Ended May 31, 2012 2011...

  • Page 131
    ... unlawfully accessed Oracle's Customer Connection support website and improperly took and used Oracle's intellectual property, including software code and knowledge management solutions. The claims alleged in the final operative complaint, Oracle's Fourth Amended Complaint, filed on August 18, 2009...

  • Page 132
    ... fraudulent statements to the General Services Administration (GSA) in 1997­98 regarding Oracle's commercial pricing practices, discounts provided to Oracle's commercial customers and discounts provided to government purchasers. On October 6, 2011, the parties signed a settlement agreement, which...

  • Page 133
    ... assets and unjust enrichment. Plaintiffs seek an injunction of the Pillar Data transaction, rescission of the Pillar Data transaction, disgorgement of our Chief Executive Officer's alleged profits and other declaratory and monetary relief. On January 13, 2012, plaintiffs filed an amended complaint...

  • Page 134
    ... ORACLE CORPORATION VALUATION AND QUALIFYING ACCOUNTS Additions Charged to Operations or Other Accounts Translation Adjustments and Other (in millions) Beginning Balance Write-offs Ending Balance Allowances for Doubtful Trade Receivables Year Ended: May 31, 2010 ...May 31, 2011 ...May 31, 2012...

  • Page 135
    ... by the undersigned, thereunto duly authorized. ORACLE CORPORATION Date: June 26, 2012 By: /s/ LAWRENCE J. ELLISON Lawrence J. Ellison Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on...

  • Page 136
    ...125% Note due 2039, together with Officers' Certificate issued July 8, 2009 setting forth the terms of the Notes Forms of Original 2020 Note and Original 2040 Note, together with Officers' Certificate issued July 19, 2010 setting forth the terms of the Notes 4/8/08 Oracle Corporation 4.07 7/8/09...

  • Page 137
    ...Filing Exhibit Date Filed By Filed Herewith 4.09 10.01* Forms of New 2020 Note and New 2040 Note Oracle Corporation 1993 Deferred Compensation Plan, as amended and restated as of January 1, 2008 Oracle Corporation Employee Stock Purchase Plan (1992), as amended and restated as of October 1, 2009...

  • Page 138
    ... Interactive Data Files Pursuant to Rule 405 of Regulation S­T: (i) Consolidated Balance Sheets as of May 31, 2012 and 2011, (ii) Consolidated Statements of Operations for the years ended May 31, 2012, 2011 and 2010 (iii) Consolidated Statements of Equity for the years ended May 31, 2012, 2011 and...

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