Oracle 2012 Annual Report Download - page 46

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number of factors, including the volume of purchases of hardware products, the mix of hardware products
purchased and the percentage of our hardware systems support contract customer base that renews its support
contracts. All of these factors are heavily influenced by our customers’ decisions to either maintain or upgrade
their existing hardware systems’ infrastructure to newly developed technologies that are available.
Our hardware systems support margins have been and will be affected by our acquisitions and related accounting
including fair value adjustments relating to hardware systems support obligations assumed and by the
amortization of intangible assets. As required by business combination accounting rules, we recorded
adjustments to reduce our hardware systems support revenues for contracts assumed from our acquisitions to
their estimated fair values. These amounts would have been recorded as hardware systems support revenues by
the acquired businesses as independent entities in the amounts of $30 million, $148 million and $128 million for
fiscal 2012, 2011 and 2010, respectively.
To the extent underlying hardware systems support contracts are renewed with us following an acquisition, we
will recognize the revenues for the full values of the hardware systems support contracts over the support
periods.
Services Business
Our services business is comprised of the remainder 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 businesses. The proportion of our services revenues relative to our total revenues was
affected by our entry into the hardware systems business as a result of our acquisition of Sun in the third quarter
of fiscal 2010. Our services revenues are impacted by certain of our acquisitions, general economic conditions,
personnel reductions in our customers’ IT departments, tighter controls over discretionary spending and the
growth in our software and hardware systems products revenues.
Our consulting line of business primarily provides services to customers in business and IT strategy alignment,
enterprise architecture planning and design, initial product implementation and integration and ongoing product
enhancements and upgrades. The amount of consulting revenues recognized tends to lag the amount of our
software and hardware systems products revenues by several quarters since consulting services, if purchased, are
typically segmentable from the products with which they relate and are performed after the customer’s purchase
of the products. Our services revenues as they relate to consulting services are dependent upon general economic
conditions and the level of our product revenues, in particular the new software license sales of our application
products. To the extent we are able to grow our products revenues, in particular our software application product
revenues, we would also generally expect to be able to eventually grow our consulting revenues.
Oracle managed cloud services provide comprehensive software and hardware management and maintenance
services—including deployment, management, monitoring, patching, security and upgrade services—for
customers hosted at our Oracle data center facilities, select partner data centers, or physically on-premise at
customer facilities. Additionally, we provide support services, both on-premise and remote, to Oracle customers
to enable increased performance and higher availability of their products and services. We believe that our
managed cloud services offerings provide our customers with greater value and choice through increased
business performance, reduced risk, a predictable cost and more flexibility in terms of service in order to
maximize the performance of their Oracle software and hardware products and services.
Education services provide training to customers, partners and employees as a part of our mission to further the
adoption and usage of our software and hardware products by our customers and create opportunities to grow our
products revenues.
Acquisitions
An active acquisition program is another important element of our corporate strategy. In recent years, we have
invested billions of dollars to acquire a number of complementary companies, products, services and
technologies including Taleo Corporation (Taleo) and RightNow Technologies, Inc (RightNow) in fiscal 2012,
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