Oracle 2013 Annual Report Download - page 32

Table of Contents
We continually focus on improving our cost structure by hiring personnel in countries where advanced technical expertise and other expertise are
available at lower costs. When we make adjustments to our workforce, we may incur expenses associated with workforce reductions that delay
the benefit of a more efficient workforce structure. We may also experience increased competition for employees in these countries as the trend
toward globalization continues, which may affect our employee retention efforts and increase our expenses in an effort to offer a competitive
compensation program. Our compensation program includes stock options, which are an important tool in attracting and retaining employees in
our industry. If our stock price performs poorly, it may adversely affect our ability to retain or attract employees. In addition, because we
expense all stock-based compensation, we may in the future change our stock-based and other compensation practices. Some of the changes we
consider from time to time include a reduction in the number of employees granted stock options, a reduction in the number of stock options
granted per employee and a change to alternative forms of stock-based compensation, all of which may have an impact on our ability to retain
employees and also impact the amount of stock-based compensation expense that we record. Any changes in our compensation practices or
changes made by competitors could affect our ability to retain and motivate existing personnel and recruit new personnel.
Our sales to government clients subject us to business volatility and risks, including government budgeting cycles and appropriations, early
termination, audits, investigations, sanctions and penalties. We derive revenues from contracts with the U.S. government, state and local
governments, and foreign governments and their respective agencies, which may terminate most of these contracts at any time, without cause.
There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. Further, our U.S.
federal government contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these
contracts. Similarly, our contracts at the state and local levels in the U.S. and our contracts with foreign governments and their agencies are
generally subject to government funding authorizations. Additionally, government contracts are generally subject to audits and investigations
which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of
fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.
We may need to change our pricing models to compete successfully. The intense competition we face in the sales of our products and
services and general economic and business conditions can put pressure on us to change our prices. If our competitors offer deep discounts on
certain products or services or develop products that the marketplace considers more valuable, we may need to lower prices or offer other
favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect operating results.
Additionally, the increasing prevalence of cloud and SaaS delivery models offered by us and our competitors may unfavorably impact pricing in
both our on-premise enterprise software business and our cloud business, as well as overall demand for our on-premise software product and
service offerings, which could reduce our revenues and profitability. Our software license updates and product support fees and hardware
systems support fees are generally priced as a percentage of our net new software licenses fees and net new hardware systems products fees,
respectively. Our competitors may offer lower pricing on their support offerings, which could put pressure on us to further discount our product
or support pricing.
Any broad-based change to our prices and pricing policies could cause our revenues to decline or be delayed as our sales force implements and
our customers adjust to the new pricing policies. Some of our competitors may bundle products for promotional purposes or as a long-term
pricing strategy or provide guarantees of prices and product implementations. These practices could, over time, significantly constrain the prices
that we can charge for certain of our products. If we do not adapt our pricing models to reflect changes in customer use of our products or
changes in customer demand, our revenues could decrease. The increase in open source software distribution may also cause us to change our
pricing models.
We may not receive significant revenues from our current research and development efforts for several years, if at all. Developing
software, cloud and hardware offerings is expensive and the investment in the development of these offerings 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 and
service opportunities both through internal investments and the acquisition of intellectual property from companies that we have acquired.
Accelerated product and service introductions and short software and hardware life cycles
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