Oracle 2012 Annual Report Download - page 104

ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2012
preference right to receive the first approximately $565 million of the Earn-Out, if any, and rights to 55% of any
amount of the Earn-Out that exceeds $565 million.
The Earn-Out will be calculated with respect to a three-year period that commenced with our second quarter of
fiscal 2012 and will conclude with our first quarter of fiscal 2015 (Earn-Out Period). The Earn-Out will be an
amount (if positive) calculated based on the product of (i) the difference between (x) future revenues generated
from the sale of certain Pillar Data products during Oracle’s last four full fiscal quarters during the Earn-Out
Period minus (y) certain losses associated with certain Pillar Data products incurred over the entire Earn-Out
Period, multiplied by (ii) three. Our obligation to pay the Earn-Out will be subject to reduction as a result of our
right to set-off the amount of any indemnification claims we may have under the Merger Agreement. We do not
expect the amount of the Earn-Out or its potential impact will be material to our results of operations or financial
position.
We have included the financial results of Pillar Data in our consolidated financial statements from the date of
acquisition. These results were not material to our consolidated financial statements. The estimated fair value of
the liability for contingent consideration, representing the preliminary purchase price payable for our acquisition
of Pillar Data, was approximately $346 million and was included in other non-current liabilities in our
consolidated balance sheet. This preliminary purchase price payable may differ from the amount that is
ultimately payable via the Earn-Out calculation (described above) with any changes in the liability recorded as
acquisition related and other in our consolidated statements of operations until the liability is settled. We have
preliminarily recorded $142 million of identifiable intangible assets and $11 million of net tangible liabilities,
based on their estimated fair values, and $215 million of residual goodwill. The fair value of contingent
consideration payable was estimated using a discounted cash flow technique with significant inputs that are not
observable in the market and thus represents a Level 3 fair value measurement as defined in the ASC 820. The
significant inputs in the Level 3 measurement not supported by market activity included our probability
assessments of expected future cash flows related to our acquisition of Pillar Data during the Earn-Out Period,
appropriately discounted considering the uncertainties associated with the obligation, and calculated in
accordance with the terms of the Merger Agreement. Subsequent to the date of acquisition, the estimated fair
value of the Earn-Out 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 Fiscal 2012 Acquisitions
During fiscal 2012, we acquired certain other companies and purchased certain technology and development
assets primarily to expand our products and services offerings. These acquisitions were not individually
significant. We have included the financial results of these companies in our consolidated financial statements
from their respective acquisition dates and the results from each of these companies were not individually
material to our consolidated financial statements. In the aggregate, the total preliminary purchase price for these
acquisitions was approximately $1.6 billion, which consisted of approximately $1.6 billion in cash and $5 million
for the fair value of stock options assumed. We have preliminarily recorded $540 million of identifiable
intangible assets and $29 million of net tangible liabilities related primarily to deferred tax liabilities, based on
their estimated fair values, and $1.1 billion of residual goodwill.
In aggregate, companies acquired during fiscal 2012 collectively contributed $231 million to our total software
revenues during fiscal 2012. Other collective revenue and earnings contributions were not significant or were not
separately identifiable due to the integration of these acquired entities into our existing operations.
The preliminary fair value estimates for the assets acquired and liabilities assumed for all acquisitions completed
during fiscal 2012 were based upon preliminary calculations and valuations and our estimates and assumptions
for each of these acquisitions are subject to change as we obtain additional information for our estimates during
the respective measurement periods (up to one year from the respective acquisition dates). The primary areas of
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