Oracle 2012 Annual Report Download - page 35

services and perceive them to be not secure. This in turn could lead to fewer customers using our products and
services and result in reduced revenue and earnings. The costs we would incur to address and fix these security
incidents would increase our expenses. These types of security incidents could also lead to lawsuits, regulatory
investigations and claims and increased legal liability, including in some cases contractual costs related to
customer notification and fraud monitoring.
Further, as regulatory focus on privacy issues continues to increase and worldwide laws and regulations
concerning the protection of personal information expand and become more complex, these potential risks to our
business will intensify. Changes in laws or regulations associated with the protection of certain types of data,
such as healthcare data or other personally identifiable information, could greatly increase our cost of providing
our products and services.
Our periodic workforce restructurings can be disruptive. We have in the past restructured or made other
adjustments to our workforce, including our direct sales force on which we rely heavily, in response to
management changes, product changes, performance issues, acquisitions and other internal and external
considerations. In the past, sales force and other restructurings have generally resulted in a temporary lack of
focus and reduced productivity. These effects could recur in connection with future acquisitions and other
restructurings and our revenues could be negatively affected.
We might experience significant errors in our software and hardware products and services. Despite testing
prior to their release, software and hardware products sometimes contain errors, especially when first introduced
or when new versions are released. The detection and correction of any errors can be time consuming and costly.
Errors in our software or hardware products could affect the ability of our products to work with other software
or hardware products, could delay the development or release of new products or new versions of products and
could adversely affect market acceptance of our products. If we experience errors or delays in releasing our new
software or hardware products or new 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 exploited, could affect our ability to conduct our business operations. End users, who rely on our
software products and services for applications that are critical to their businesses, may have a greater sensitivity
to product errors than customers for software products generally. Errors in our software and hardware products or
services could expose us to product liability, performance and/or warranty claims as well as harm our reputation,
which could impact our future sales of products and services.
We may not receive significant revenues from our current research and development efforts for several years, if
at all. Developing software and hardware products is expensive and the investment in product development
often involves a long return on investment cycle. We have made and expect to continue to make significant
investments in research and development and related product opportunities. Accelerated product introductions and
short product life cycles require high levels of expenditures for research and development that could adversely
affect our operating results if not offset by revenue increases. We believe that we must continue to dedicate a
significant amount of resources to our research and development efforts to maintain our competitive position.
However, we do not expect to receive significant revenues from these investments for several years, if at all.
Business disruptions could affect our operating results. A significant portion of our research and development
activities and certain other critical business operations are concentrated in a few geographic areas. We are a
highly automated business and a disruption or failure of our systems could cause delays in completing sales and
providing services, including some of our cloud software subscription and managed cloud services offerings. A
major earthquake, fire or other catastrophic event that results in the destruction or disruption of any of our critical
business or IT systems could severely affect our ability to conduct normal business operations and, as a result,
our future operating results could be materially and adversely affected.
Adverse litigation results could affect our business. We are subject to various legal proceedings. Litigation can
be lengthy, expensive and disruptive to our operations and results cannot be predicted with certainty. An adverse
decision could result in monetary damages or injunctive relief that could affect our business, operating results or
financial condition. Additional information regarding certain of the lawsuits we are involved in is discussed under
Note 18 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
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