Oracle 2012 Annual Report Download - page 45

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Our Oracle Engineered Systems include Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud,
Oracle Exalytics In-Memory Machine, SPARC SuperCluster, Oracle Database Appliance and the Oracle Big
Data Appliance. By combining our server and storage hardware with our software, our open, integrated products
better address customer on-premise and cloud computing requirements for performance, scalability, reliability,
security, ease of management and lower total cost of ownership.
We offer a wide range of server systems using our SPARC microprocessor. Our SPARC servers are
differentiated by their reliability, security, scalability and customer environments that they target (general
purpose or specialized systems). Our midsize and large servers are designed to offer greater performance and
lower total cost of ownership than mainframe systems for business critical applications and for customers having
more computationally intensive needs. Our SPARC servers run the Oracle Solaris operating system and are
designed for the most demanding mission critical enterprise environments at any scale.
We also offer enterprise x86 servers. These x86 servers are primarily based on microprocessor platforms from
Intel Corporation and are also compatible with Oracle Solaris, Oracle Linux, Microsoft Windows and other
operating systems.
Our Netra line of servers are aimed at the unique needs of original equipment manufacturers (OEMs) and
network equipment providers. Rack-optimized systems and our blade product offerings combine high-density
hardware architecture and system management software that OEMs find particularly useful in building their own
solution architectures.
Our storage products are designed to securely manage, protect, archive and restore customers’ mission critical
data assets and consist of tape, disk, hardware-related software including file systems software, back-up and
archive software and storage management software and networking for mainframe and open systems
environments.
The majority of our hardware systems products are sold through indirect channels, including independent
distributors and value added resellers.
To produce our hardware products, we rely on both our internal manufacturing operations as well as third party
manufacturing partners. Our internal manufacturing operations consist primarily of final assembly, test and
quality control of enterprise and data center servers and storage systems. For all other manufacturing, we rely on
third party manufacturing partners. We distribute most of our hardware products either from our facilities or
partner facilities. We strive to reduce costs by simplifying our manufacturing processes through increased
standardization of components across product types and a “build-to-order” manufacturing process in which
products generally are built only after customers have placed firm orders. In addition, we seek to enhance
hardware systems support processes that are designed to proactively identify and solve quality issues and to
increase the amount of new hardware systems support contracts sold in connection with the sales of new
hardware products.
Our hardware systems products revenues, cost of hardware systems products and operating margins that we
report are affected by the strength of general economic and business conditions, governmental budgetary
constraints, our strategy for and the competitive position of our hardware systems products, our acquisitions and
foreign currency rate fluctuations. In addition, our operating margins for our hardware systems products segment
have been and will be affected by the amortization of intangible assets.
We have limited experience in predicting our quarterly hardware systems products revenues. The timing of
customer orders and delays in our ability to timely manufacture or deliver a few large transactions could
substantially affect the amount of hardware 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 Solaris, and can include product repairs, maintenance services and technical support services. Typically,
our hardware systems support contract arrangements are invoiced to the customer at the beginning of the support
period and are one year in duration. Our hardware systems support revenues that we report are influenced by a
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