Oracle 2012 Annual Report Download - page 64

Software License Updates and Product Support: Software license updates grant customers rights to
unspecified software product upgrades and maintenance releases issued during the support period. Product
support includes internet access to technical content as well as internet and telephone access to technical support
personnel in our global support centers. Expenses associated with our software license updates and product
support line of business include the cost of providing the support services, largely personnel related expenses,
and the amortization of our intangible assets associated with software support contracts and customer
relationships obtained from acquisitions.
Year Ended May 31,
Percent Change Percent Change
(Dollars in millions) 2012 Actual Constant 2011 Actual Constant 2010
Software License Updates and Product Support Revenues:
Americas ......................................... $ 8,672 9% 9% $ 7,963 12% 11% $ 7,100
EMEA ........................................... 5,194 8% 8% 4,802 12% 13% 4,304
Asia Pacific ....................................... 2,344 15% 12% 2,031 20% 12% 1,688
Total revenues ................................. 16,210 10% 9% 14,796 13% 12% 13,092
Expenses:
Software license updates and product support(1) ........... 1,208 -3% -3% 1,250 20% 18% 1,046
Stock-based compensation ............................ 18 27% 27% 14 -20% -20% 17
Amortization of intangible assets(2) ..................... 863 4% 4% 827 -1% -1% 839
Total expenses ................................. 2,089 0% 0% 2,091 10% 9% 1,902
Total Margin ...................................... $ 14,121 11% 11% $ 12,705 14% 12% $ 11,190
Total Margin % .................................... 87% 86% 85%
% Revenues by Geography:
Americas ......................................... 54% 54% 54%
EMEA ........................................... 32% 32% 33%
Asia Pacific ....................................... 14% 14% 13%
(1) Excluding stock-based compensation
(2) 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 in fiscal 2012 as a result of new software licenses sold with substantially all
customers electing to purchase support contracts during the trailing 4-quarter period, the renewal of substantially all of
the customer base eligible for renewal in the current fiscal year and incremental revenues from recent acquisitions.
Excluding the effect of currency rate fluctuations, the Americas contributed 53%, EMEA contributed 29% and Asia
Pacific contributed 18% to the increase in software license updates and product support revenues.
In reported currency, software license updates and product support revenues in fiscal 2012 included incremental
revenues of $83 million from our recently acquired companies. As a result of our acquisitions, we recorded
adjustments to reduce assumed support obligations to their estimated fair values at the acquisition dates. Due to
our application of business combination accounting rules, software license updates and product support revenues
related to support contracts in the amounts of $48 million, $80 million and $86 million that would have been
otherwise recorded by our acquired businesses as independent entities were not recognized in fiscal 2012, 2011
and 2010, respectively. Historically, substantially all of our customers, including customers from acquired
companies, renew their software support contracts when such contracts are eligible for renewal. To the extent
these underlying support contracts are renewed, we will recognize the revenues for the full value of these
contracts over the support periods, the substantial majority of which are one year in duration.
Excluding the effect of foreign currency rate fluctuations, total software license updates and product support expenses
were flat in fiscal 2012 as an increase in intangible asset amortization and salaries expenses from increased headcount
were offset by reductions in variable compensation expenses, bad debt expenses and certain other operating expenses.
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