Exhibit 99.1

 

For Immediate Release

 

Contact:		Ken Bond		Deborah Hellinger
		Oracle Investor Relations		Oracle Corporate Communications
		1.650.607.0349		1.212.508.7935
		ken.bond@oracle.com		deborah.hellinger@oracle.com

ORACLE REPORTS Q4 GAAP EPS UP 11% TO 69 CENTS; Q4 NON-GAAP EPS UP 10% TO 82 CENTS

Fiscal Year 2012 Operating Cash Flow Up 23% to $13.7 billion

REDWOOD SHORES, Calif., June 18, 2012 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2012 Q4 GAAP total revenues were up 1% to $10.9 billion, while non-GAAP total revenues were up 1% to $11.0 billion. Both GAAP and non-GAAP new software license revenues were up 7% to $4.0 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 5% to $4.2 billion. Both GAAP and non-GAAP hardware systems products revenues were down 16% to $977 million. GAAP operating income was up 5% to $4.6 billion, and GAAP operating margin was 42%. Non-GAAP operating income was up 5% to $5.5 billion, and non-GAAP operating margin was 50%. GAAP net income was up 8% to $3.5 billion, while non-GAAP net income was up 7% to $4.1 billion. GAAP earnings per share were $0.69, up 11% compared to last year while non-GAAP earnings per share were up 10% to $0.82. GAAP operating cash flow for fiscal year 2012 was $13.7 billion, up 23% compared to last year.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q4 GAAP earnings per share would have been $0.03 higher at $0.72, up 16%, and Q4 non-GAAP earnings per share would have been $0.04 higher at $0.86, up 15%. Both GAAP and non-GAAP total revenues also would have been up 5%, GAAP new software license revenues would have been up 11%, non-GAAP new software license revenues would have been up 12% and both GAAP and non-GAAP hardware systems products revenues would have been down 13%.

For fiscal year 2012, GAAP total revenues were up 4% to $37.1 billion, while non-GAAP total revenues were up 4% to $37.2 billion. GAAP new software license revenues were up 7% to $9.9 billion. Non-GAAP new software license revenues were up 8% to $9.9 billion.

---

GAAP software license updates and product support revenues were up 10% to $16.2 billion, while non-GAAP software license updates and product support revenues were up 9% to $16.3 billion. Both GAAP and non-GAAP hardware systems products revenues were $3.8 billion. GAAP operating income was up 14% to $13.7 billion, and GAAP operating margin was 37%. Non-GAAP operating income was up 8% to $17.2 billion, and non-GAAP operating margin was 46%. GAAP net income was up 17% to $10.0 billion, while non-GAAP net income was up 10% to $12.5 billion. GAAP earnings per share were $1.96, up 18% compared to last year while non-GAAP earnings per share were up 11% to $2.46.

“Our record-breaking fourth quarter featured several all-time highs for Oracle: new software license sales of $4 billion, total software revenue of $8 billion, total revenue of $11 billion, and EPS of 82 cents,” said Oracle President and CFO, Safra Catz. “For the fiscal year, we also set all-time highs for operating margins of 46%, and operating cash flow of $13.7 billion.”

“Our engineered systems business is now operating at well over a billion dollar revenue run rate,” said Oracle President, Mark Hurd. “For the year, the Exadata, Exalogic, Exalytics, SPARC SuperCluster and the Oracle Big Data Appliance product group grew over 100% year-over-year.”

“The development of Oracle Cloud is strategic to increasing the size and profitability of Oracle’s software business,” said Oracle Chief Executive Officer, Larry Ellison. “Our Oracle Cloud SaaS business is nearly at a billion dollar revenue run rate, the same size as our engineered systems hardware business. The combination of engineered systems and the Oracle Cloud will drive Oracle’s growth in FY 2013.”

The Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on July 13, 2012, with a payment date of August 3, 2012.

Oracle also announced that its Board of Directors authorized the repurchase of up to an additional $10.0 billion of common stock under its existing share repurchase program in future quarters.

---

Q4 and Fiscal 2012 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 3:00 p.m. Pacific. You may listen to the call by dialing (888) 282-4044 or (913) 312-9303, Passcode: 448965. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle’s Q4 results and Fiscal 2012 financial tables are available on the Oracle Investor Relations website. A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 2112934.

About Oracle

Oracle engineers hardware and software to work together in the cloud and in your data center. For more information about Oracle (NASDAQ: ORCL), visit www.oracle.com or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.

# # #

Trademarks

Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

“Safe Harbor” Statement: Statements in this press release relating to Oracle’s future plans, expectations, beliefs, intentions and prospects, including statements regarding FY2013, Oracle Cloud and our share repurchase program, are “forward-looking statements” and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the current European debt crisis, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for software license updates and product support. (3) Our hardware systems business may not be successful, and we may fail to achieve our financial forecasts with respect to this business. (4) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (5) Our international sales and operations subject us to additional risks that

---

can adversely affect our operating results, including risks relating to foreign currency gains and losses and risks relating to compliance with international and U.S. laws that apply to our international operations. (6) Intense competitive forces demand rapid technological advances and frequent new product introductions and could require us to reduce prices or cause us to lose customers. (7) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses or hardware systems products or purchase or renew support contracts. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Copies of these filings are available online from the SEC or by contacting Oracle Corporation’s Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle’s Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of June 18, 2012. Oracle undertakes no duty to update any statement in light of new information or future events.

---

ORACLE CORPORATION

Q4 FISCAL 2012 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

		Three Months Ended May 31,																% Increase				% Increase (Decrease)
		2012				% of Revenues				2011				% of Revenues				(Decrease) in US $				in Constant Currency (1)
REVENUES
New software licenses		$	3,985				37%			$	3,736				35%				7%				11%
Software license updates and product support			4,152				38%				3,961				36%				5%				8%
Software Revenues			8,137				75%				7,697				71%				6%				10%
Hardware systems products			977				9%				1,157				11%				(16%	)			(13%	)
Hardware systems support			600				5%				673				6%				(11%	)			(7%	)
Hardware Systems Revenues			1,577				14%				1,830				17%				(14%	)			(11%	)
Services			1,202				11%				1,248				12%				(4%	)			0%
Total Revenues			10,916				100%				10,775				100%				1%				5%
OPERATING EXPENSES
Sales and marketing			2,100				19%				2,098				20%				0%				4%
Software license updates and product support			327				3%				350				3%				(6%	)			(3%	)
Hardware systems products			476				4%				511				5%				(7%	)			(4%	)
Hardware systems support			248				2%				309				3%				(20%	)			(17%	)
Services			955				9%				1,000				9%				(5%	)			0%
Research and development			1,226				11%				1,170				11%				5%				7%
General and administrative			278				3%				255				2%				9%				12%
Amortization of intangible assets			640				6%				598				6%				7%				7%
Acquisition related and other			(7	)			0%				48				0%				(115%	)			(114%	)
Restructuring			77				1%				77				1%				0%				5%
Total Operating Expenses			6,320				58%				6,416				60%				(1%	)			1%
OPERATING INCOME			4,596				42%				4,359				40%				5%				11%
Interest expense			(194	)			(2%	)			(195	)			(1%	)			(1%	)			(1%	)
Non-operating income (expense), net			(20	)			0%				6				0%				(422%	)			(379%	)
INCOME BEFORE PROVISION FOR INCOME TAXES			4,382				40%				4,170				39%				5%				11%
Provision for income taxes			931				8%				961				9%				(3%	)			2%
NET INCOME		$	3,451				32%			$	3,209				30%				8%				13%
EARNINGS PER SHARE:
Basic		$	0.70							$	0.63
Diluted		$	0.69							$	0.62
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic			4,950								5,065
Diluted			5,027								5,164

(1)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended May 31, 2012 compared with the corresponding prior year period decreased our total revenues by 4 percentage points, total operating expenses by 2 percentage points and operating income by 6 percentage points.

 

 

1

---

ORACLE CORPORATION

Q4 FISCAL 2012 FINANCIAL RESULTS

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

($ in millions, except per share data)

 

		Three Months Ended May 31,																								% Increase (Decrease) in US $								% Increase (Decrease) in Constant Currency (2)
		2012								2012				2011								2011				GAAP				Non-GAAP				GAAP				Non-GAAP
		GAAP				Adj.				Non-GAAP				GAAP				Adj.				Non-GAAP
TOTAL REVENUES (3) (4) (5)		$	10,916			$	34			$	10,950			$	10,775			$	31			$	10,806				1%				1%				5%				5%
TOTAL SOFTWARE REVENUES (3) (4)		$	8,137			$	30			$	8,167			$	7,697			$	17			$	7,714				6%				6%				10%				10%
New software licenses (3)			3,985				22				4,007				3,736				—				3,736				7%				7%				11%				12%
Software license updates and product support (4)			4,152				8				4,160				3,961				17				3,978				5%				5%				8%				8%
TOTAL HARDWARE SYSTEMS REVENUES (5)		$	1,577			$	4			$	1,581			$	1,830			$	14			$	1,844				(14%	)			(14%	)			(11%	)			(12%	)
Hardware systems products			977				—				977				1,157				—				1,157				(16%	)			(16%	)			(13%	)			(13%	)
Hardware systems support (5)			600				4				604				673				14				687				(11%	)			(12%	)			(7%	)			(9%	)
TOTAL OPERATING EXPENSES		$	6,320			$	(882	)		$	5,438			$	6,416			$	(848	)		$	5,568				(1%	)			(2%	)			1%				1%
Stock-based compensation (6)			172				(172	)			—				125				(125	)			—				37%				*				37%				*
Amortization of intangible assets (7)			640				(640	)			—				598				(598	)			—				7%				*				7%				*
Acquisition related and other			(7	)			7				—				48				(48	)			—				(115%	)			*				(114%	)			*
Restructuring			77				(77	)			—				77				(77	)			—				0%				*				5%				*
OPERATING INCOME		$	4,596			$	916			$	5,512			$	4,359			$	879			$	5,238				5%				5%				11%				10%
OPERATING MARGIN %			42%								50%				40%								48%				164 bp.				186 bp.				209 bp.				205 bp.
INCOME TAX EFFECTS (8)		$	931			$	224			$	1,155			$	961			$	216			$	1,177				(3%	)			(2%	)			2%				2%
NET INCOME		$	3,451			$	692			$	4,143			$	3,209			$	663			$	3,872				8%				7%				13%				12%
DILUTED EARNINGS PER SHARE		$	0.69							$	0.82			$	0.62							$	0.75				11%				10%				16%				15%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING			5,027				—				5,027				5,164				—				5,164				(3%	)			(3%	)			(3%	)			(3%	)

(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

 

(3)	As of May 31, 2012, approximately $34 million in estimated revenues related to assumed cloud software subscription contracts will not be recognized for fiscal 2013 due to business combination accounting rules.

 

(4)	As of May 31, 2012, approximately $13 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

 

(5)	As of May 31, 2012, approximately $11 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2013 due to business combination accounting rules.

 

(6)	Stock-based compensation was included in the following GAAP operating expense categories:

 

		Three Months Ended May 31, 2012												Three Months Ended May 31, 2011
		GAAP				Adj.				Non-GAAP				GAAP				Adj.				Non-GAAP
Sales and marketing		$	35			$	(35	)		$	—			$	23			$	(23	)		$	—
Software license updates and product support			5				(5	)			—				3				(3	)			—
Hardware systems support			1				(1	)			—				1				(1	)			—
Services			7				(7	)			—				3				(3	)			—
Research and development			82				(82	)			—				60				(60	)			—
General and administrative			42				(42	)			—				35				(35	)			—
Subtotal			172				(172	)			—				125				(125	)			—
Acquisition related and other			12				(12	)			—				2				(2	)			—
Total stock-based compensation		$	184			$	(184	)		$	—			$	127			$	(127	)		$	—

 

(7)	Estimated future annual amortization expense related to intangible assets as of May 31, 2012 was as follows:

 

Fiscal 2013		$	2,313
Fiscal 2014			1,938
Fiscal 2015			1,488
Fiscal 2016			941
Fiscal 2017			384
Thereafter			824
Total intangible assets subject to amortization			7,888
In-process research and development			11
Total intangible assets, net		$	7,899

 

(8)

Income tax effects were calculated reflecting an effective GAAP tax rate of 21.2% and 23.1% in the fourth quarter of fiscal 2012 and 2011, respectively, and an effective non-GAAP tax rate of 21.8% and 23.3% in the fourth quarter of fiscal 2012 and 2011, respectively. The difference between our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2012 was primarily due to the disproportionate rate impact of discrete items, differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses, and income tax effects related to acquired tax exposures in the period. The difference between our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2011 was primarily due to income tax effects related to acquired tax exposures and differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses in the period.

 

*	Not meaningful

 

2

---

ORACLE CORPORATION

FISCAL 2012 YEAR TO DATE FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in millions, except per share data)

 

		Year Ended May 31,																				% Increase (Decrease)
																		% Increase
		2012				% of Revenues				2011				% of Revenues				(Decrease) in US $				in Constant Currency (1)
REVENUES
New software licenses		$	9,906				27%			$	9,235				26%				7%				8%
Software license updates and product support			16,210				43%				14,796				42%				10%				9%
Software Revenues			26,116				70%				24,031				68%				9%				9%
Hardware systems products			3,827				10%				4,382				12%				(13%	)			(14%	)
Hardware systems support			2,475				7%				2,562				7%				(3%	)			(4%	)
Hardware Systems Revenues			6,302				17%				6,944				19%				(9%	)			(10%	)
Services			4,703				13%				4,647				13%				1%				1%
Total Revenues			37,121				100%				35,622				100%				4%				4%
OPERATING EXPENSES
Sales and marketing			7,127				19%				6,579				18%				8%				8%
Software license updates and product support			1,226				3%				1,264				3%				(3%	)			(3%	)
Hardware systems products			1,843				5%				2,057				6%				(10%	)			(10%	)
Hardware systems support			1,046				3%				1,259				3%				(17%	)			(18%	)
Services			3,743				10%				3,818				11%				(2%	)			(2%	)
Research and development			4,523				12%				4,519				13%				0%				1%
General and administrative (2)			1,126				3%				970				3%				16%				16%
Amortization of intangible assets			2,430				7%				2,428				7%				0%				0%
Acquisition related and other			56				0%				208				1%				(73%	)			(74%	)
Restructuring			295				1%				487				1%				(40%	)			(40%	)
Total Operating Expenses			23,415				63%				23,589				66%				(1%	)			(1%	)
OPERATING INCOME			13,706				37%				12,033				34%				14%				14%
Interest expense			(766	)			(2%	)			(808	)			(3%	)			(5%	)			(5%	)
Non-operating income, net			22				0%				186				1%				(88%	)			(83%	)
INCOME BEFORE PROVISION FOR INCOME TAXES			12,962				35%				11,411				32%				14%				13%
Provision for income taxes			2,981				8%				2,864				8%				4%				4%
NET INCOME		$	9,981				27%			$	8,547				24%				17%				16%
EARNINGS PER SHARE:
Basic		$	1.99							$	1.69
Diluted		$	1.96							$	1.67
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic			5,015								5,048
Diluted			5,095								5,128

(1)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the year ended May 31, 2012 compared with the corresponding prior year had no impact on our total revenues, total operating expenses and operating income.

 

(2)	General and administrative expenses for the year ended May 31, 2011 included a benefit of $120 million related to the recovery of legal costs.

 

3

---

ORACLE CORPORATION

FISCAL 2012 YEAR TO DATE FINANCIAL RESULTS

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)

($ in millions, except per share data)

 

		Year Ended May 31,																								% Increase (Decrease) in US $								% Increase (Decrease) in Constant Currency (2)
		2012 GAAP				Adj.				2012 Non-GAAP				2011 GAAP				Adj.				2011 Non-GAAP				GAAP				Non-GAAP				GAAP				Non-GAAP
TOTAL REVENUES (3) (4) (5)		$	37,121			$	100			$	37,221			$	35,622			$	228			$	35,850				4%				4%				4%				4%
TOTAL SOFTWARE REVENUES (3) (4)		$	26,116			$	70			$	26,186			$	24,031			$	80			$	24,111				9%				9%				9%				9%
New software licenses (3)			9,906				22				9,928				9,235				—				9,235				7%				8%				8%				9%
Software license updates and product support (4)			16,210				48				16,258				14,796				80				14,876				10%				9%				9%				9%
TOTAL HARDWARE SYSTEMS REVENUES (5)		$	6,302			$	30			$	6,332			$	6,944			$	148			$	7,092				(9%	)			(11%	)			(10%	)			(12%	)
Hardware systems products			3,827				—				3,827				4,382				—				4,382				(13%	)			(13%	)			(14%	)			(14%	)
Hardware systems support (5)			2,475				30				2,505				2,562				148				2,710				(3%	)			(8%	)			(4%	)			(8%	)
TOTAL OPERATING EXPENSES		$	23,415			$	(3,407	)		$	20,008			$	23,589			$	(3,623	)		$	19,966				(1%	)			0%				(1%	)			0%
Hardware systems products			1,843				—				1,843				2,057				(2	)			2,055				(10%	)			(10%	)			(10%	)			(10%	)
Stock-based compensation (6)			626				(626	)			—				498				(498	)			—				25%				*				25%				*
Amortization of intangible assets (7)			2,430				(2,430	)			—				2,428				(2,428	)			—				0%				*				0%				*
Acquisition related and other			56				(56	)			—				208				(208	)			—				(73%	)			*				(74%	)			*
Restructuring			295				(295	)			—				487				(487	)			—				(40%	)			*				(40%	)			*
OPERATING INCOME		$	13,706			$	3,507			$	17,213			$	12,033			$	3,851			$	15,884				14%				8%				14%				8%
OPERATING MARGIN %			37%								46%				34%								44%				314 bp.				194 bp.				306 bp.				184 bp.
INCOME TAX EFFECTS (8)		$	2,981			$	967			$	3,948			$	2,864			$	1,003			$	3,867				4%				2%				4%				2%
NET INCOME		$	9,981			$	2,540			$	12,521			$	8,547			$	2,848			$	11,395				17%				10%				16%				10%
DILUTED EARNINGS PER SHARE		$	1.96							$	2.46			$	1.67							$	2.22				18%				11%				17%				10%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING			5,095				—				5,095				5,128				—				5,128				(1%	)			(1%	)			(1%	)			(1%	)

(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

 

(3)	As of May 31, 2012, approximately $34 million in estimated revenues related to assumed cloud software subscription contracts will not be recognized for fiscal 2013 due to business combination accounting rules.

 

(4)	As of May 31, 2012, approximately $13 million and $2 million in estimated revenues related to assumed software support contracts will not be recognized for fiscal 2013 and fiscal 2014, respectively, due to business combination accounting rules.

 

(5)	As of May 31, 2012, approximately $11 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2013 due to business combination accounting rules.

 

(6)	Stock-based compensation was included in the following GAAP operating expense categories:

 

		Year Ended												Year Ended
		May 31, 2012												May 31, 2011
		GAAP				Adj.				Non-GAAP				GAAP				Adj.				Non-GAAP
Sales and marketing		$	122			$	(122	)		$	—			$	87			$	(87	)		$	—
Software license updates and product support			18				(18	)			—				14				(14	)			—
Hardware systems products			1				(1	)			—				2				(2	)			—
Hardware systems support			5				(5	)			—				5				(5	)			—
Services			23				(23	)			—				16				(16	)			—
Research and development			295				(295	)			—				231				(231	)			—
General and administrative			162				(162	)			—				145				(145	)			—
Subtotal			626				(626	)			—				500				(500	)			—
Acquisition related and other			33				(33	)			—				10				(10	)			—
Total stock-based compensation		$	659			$	(659	)		$	—			$	510			$	(510	)		$	—

 

(7)	Estimated future annual amortization expense related to intangible assets as of May 31, 2012 was as follows:

 

Fiscal 2013		$	2,313
Fiscal 2014			1,938
Fiscal 2015			1,488
Fiscal 2016			941
Fiscal 2017			384
Thereafter			824
Total intangible assets subject to amortization			7,888
In-process research and development			11
Total intangible assets, net		$	7,899

 

(8)

Income tax effects were calculated reflecting an effective GAAP tax rate of 23.0% and 25.1% in fiscal 2012 and 2011, respectively, and an effective non-GAAP tax rate of 24.0% and 25.3% in fiscal 2012 and 2011, respectively. The difference between our GAAP and non-GAAP tax rates in fiscal 2012 was primarily due to the disproportionate rate impact of discrete items, income tax effects related to acquired tax exposures, and differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses in the period. The difference between our GAAP and non-GAAP tax rates in fiscal 2011 was primarily due to differences in jurisdictional tax rates and related tax benefits attributable to our restructuring expenses in the period, and was also due to income tax effects related to acquired tax exposures.

 

*	Not meaningful

 

4

---

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

 

		May 31,      2012				May 31,      2011
ASSETS
Current Assets:
Cash and cash equivalents		$	14,955			$	16,163
Marketable securities			15,721				12,685
Trade receivables, net			6,377				6,628
Inventories			158				303
Deferred tax assets			877				1,189
Prepaid expenses and other current assets			1,935				2,206
Total Current Assets			40,023				39,174
Non-Current Assets:
Property, plant and equipment, net			3,021				2,857
Intangible assets, net			7,899				7,860
Goodwill			25,119				21,553
Deferred tax assets			595				1,076
Other assets			1,670				1,015
Total Non-Current Assets			38,304				34,361
TOTAL ASSETS		$	78,327			$	73,535
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable, current and other current borrowings		$	2,950			$	1,150
Accounts payable			438				494
Accrued compensation and related benefits			2,002				2,320
Deferred revenues			7,035				6,802
Other current liabilities			2,963				3,426
Total Current Liabilities			15,388				14,192
Non-Current Liabilities:
Notes payable and other non-current borrowings			13,524				14,772
Income taxes payable			3,759				3,169
Other non-current liabilities			1,569				1,157
Total Non-Current Liabilities			18,852				19,098
Equity			44,087				40,245
TOTAL LIABILITIES AND EQUITY		$	78,327			$	73,535

 

5

---

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

 

		Year Ended May 31,
		2012				2011
Cash Flows From Operating Activities:
Net income		$	9,981			$	8,547
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			486				368
Amortization of intangible assets			2,430				2,428
Deferred income taxes			9				(253	)
Stock-based compensation			659				510
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards			182				325
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards			(97	)			(215	)
Other, net			84				68
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease (increase) in trade receivables, net			84				(565	)
Decrease (increase) in inventories			150				(28	)
(Increase) decrease in prepaid expenses and other assets			(51	)			14
Decrease in accounts payable and other liabilities			(720	)			(120	)
Increase (decrease) in income taxes payable			54				(96	)
Increase in deferred revenues			492				231
Net cash provided by operating activities			13,743				11,214
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments			(38,625	)			(31,009	)
Proceeds from maturities and sales of marketable securities and other investments			35,594				27,120
Acquisitions, net of cash acquired			(4,702	)			(1,847	)
Capital expenditures			(648	)			(450	)
Proceeds from sale of property			—				105
Net cash used for investing activities			(8,381	)			(6,081	)
Cash Flows From Financing Activities:
Payments for repurchases of common stock			(5,856	)			(1,160	)
Proceeds from issuances of common stock			733				1,376
Payments of dividends to stockholders			(1,205	)			(1,061	)
Proceeds from borrowings, net of issuance costs			1,700				4,354
Repayments of borrowings			(1,405	)			(3,143	)
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards			97				215
Distributions to noncontrolling interests			(163	)			(65	)
Net cash (used for) provided by financing activities			(6,099	)			516
Effect of exchange rate changes on cash and cash equivalents			(471	)			600
Net (decrease) increase in cash and cash equivalents			(1,208	)			6,249
Cash and cash equivalents at beginning of period			16,163				9,914
Cash and cash equivalents at end of period		$	14,955			$	16,163

 

6

---

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

FREE CASH FLOW—TRAILING 4-QUARTERS (1)

($ in millions)

 

		Fiscal 2011																Fiscal 2012
		Q1				Q2				Q3				Q4				Q1				Q2				Q3				Q4
GAAP Operating Cash Flow		$	8,760			$	9,053			$	9,948			$	11,214			$	12,818			$	13,129			$	13,463			$	13,743
Capital Expenditures (2)			(293	)			(369	)			(441	)			(450	)			(492	)			(500	)			(509	)			(648	)
Free Cash Flow		$	8,467			$	8,684			$	9,507			$	10,764			$	12,326			$	12,629			$	12,954			$	13,095
% Growth over prior year			0%				3%				19%				27%				46%				45%				36%				22%
GAAP Net Income		$	6,363			$	6,776			$	7,701			$	8,547			$	9,035			$	9,356			$	9,738			$	9,981
Free Cash Flow as a % of Net Income			133%				128%				123%				126%				136%				135%				133%				131%

 

(1)

To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flow generated from operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.

 

(2)	Represents capital expenditures as reported in cash flows from investing activities on our cash flow statements presented in accordance with GAAP.

 

7

---

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

SUPPLEMENTAL ANALYSIS OF GAAP REVENUES AND HEADCOUNT (1)

($ in millions)

 

		Fiscal 2011																				Fiscal 2012
		Q1				Q2				Q3				Q4				TOTAL				Q1				Q2				Q3				Q4				TOTAL
REVENUES
New software licenses		$	1,286			$	1,999			$	2,214			$	3,736			$	9,235			$	1,498			$	2,048			$	2,374			$	3,985			$	9,906
Software license updates and product support			3,450				3,645				3,740				3,961				14,796				4,022				3,986				4,051				4,152				16,210
Software Revenues			4,736				5,644				5,954				7,697				24,031				5,520				6,034				6,425				8,137				26,116
Hardware systems products			1,079				1,112				1,035				1,157				4,382				1,029				953				869				977				3,827
Hardware systems support			619				641				629				673				2,562				645				625				604				600				2,475
Hardware Systems Revenues			1,698				1,753				1,664				1,830				6,944				1,674				1,578				1,473				1,577				6,302
Services Revenues			1,068				1,185				1,146				1,248				4,647				1,180				1,180				1,141				1,202				4,703
Total Revenues		$	7,502			$	8,582			$	8,764			$	10,775			$	35,622			$	8,374			$	8,792			$	9,039			$	10,916			$	37,121
AS REPORTED REVENUE GROWTH RATES
New software licenses			25%				21%				29%				19%				23%				17%				2%				7%				7%				7%
Software license updates and product support			11%				12%				13%				15%				13%				17%				9%				8%				5%				10%
Software Revenues			14%				15%				19%				17%				17%				17%				7%				8%				6%				9%
Hardware systems products			*				*				279%				(6%	)			191%				(5%	)			(14%	)			(16%	)			(16%	)			(13%	)
Hardware systems support			*				*				239%				12%				227%				4%				(2%	)			(4%	)			(11%	)			(3%	)
Hardware Systems Revenues			*				*				263%				0%				203%				(1%	)			(10%	)			(11%	)			(14%	)			(9%	)
Services Revenues			18%				24%				23%				13%				19%				10%				0%				0%				(4%	)			1%
Total Revenues			48%				47%				37%				13%				33%				12%				2%				3%				1%				4%
CONSTANT CURRENCY GROWTH RATES (2)
New software licenses			25%				23%				27%				12%				19%				11%				3%				8%				11%				8%
Software license updates and product support			12%				13%				12%				10%				12%				10%				9%				9%				8%				9%
Software Revenues			15%				17%				17%				11%				15%				11%				7%				9%				10%				9%
Hardware systems products			*				*				274%				(11%	)			184%				(11%	)			(14%	)			(16%	)			(13%	)			(14%	)
Hardware systems support			*				*				234%				6%				218%				(3%	)			(3%	)			(3%	)			(7%	)			(4%	)
Hardware Systems Revenues			*				*				258%				(5%	)			195%				(8%	)			(10%	)			(11%	)			(11%	)			(10%	)
Services Revenues			18%				25%				21%				7%				17%				5%				0%				1%				0%				1%
Total Revenues			49%				48%				35%				7%				30%				5%				2%				4%				5%				4%
GEOGRAPHIC REVENUES
REVENUES
Americas		$	3,904			$	4,452			$	4,509			$	5,487			$	18,352			$	4,226			$	4,532			$	4,707			$	5,771			$	19,236
Europe, Middle East & Africa			2,381				2,738				2,815				3,564				11,497				2,704				2,756				2,787				3,314				11,561
Asia Pacific			1,217				1,392				1,440				1,724				5,773				1,444				1,504				1,545				1,831				6,324
Total Revenues		$	7,502			$	8,582			$	8,764			$	10,775			$	35,622			$	8,374			$	8,792			$	9,039			$	10,916			$	37,121
HEADCOUNT
GEOGRAPHIC AREA
Americas			44,494				44,815				45,825				45,887								46,338				46,672				47,884				48,901
Europe, Middle East & Africa			22,886				22,690				22,705				22,394								22,210				22,725				22,852				22,957
Asia Pacific			37,856				38,225				39,340				40,148								40,840				41,901				42,908				43,308
Total Company			105,236				105,730				107,870				108,429								109,388				111,298				113,644				115,166

(1)	The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011 and 2010 for the fiscal 2012 and fiscal 2011 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

*	Not meaningful

 

8

---

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

SUPPLEMENTAL TOTAL SOFTWARE PRODUCT REVENUE ANALYSIS (1)

($ in millions)

 

		Fiscal 2011																				Fiscal 2012
			Q1				Q2				Q3				Q4				TOTAL				Q1				Q2				Q3				Q4				TOTAL
SOFTWARE REVENUES
DATABASE & MIDDLEWARE REVENUES
New software licenses		$	937			$	1,420			$	1,575			$	2,694			$	6,626			$	1,070			$	1,479			$	1,716			$	2,706			$	6,971
Software license updates and product support			2,316				2,443				2,523				2,663				9,945				2,710				2,707				2,776				2,828				11,019
Database and Middleware Revenues		$	3,253			$	3,863			$	4,098			$	5,357			$	16,571			$	3,780			$	4,186			$	4,492			$	5,534			$	17,990
AS REPORTED GROWTH RATES
New software licenses			32%				21%				27%				18%				23%				14%				4%				9%				0%				5%
Software license updates and product support			12%				15%				15%				15%				14%				17%				11%				10%				6%				11%
Database and Middleware Revenues			17%				17%				19%				17%				18%				16%				8%				10%				3%				9%
CONSTANT CURRENCY GROWTH RATES (2)
New software licenses			32%				23%				26%				10%				19%				8%				4%				10%				5%				6%
Software license updates and product support			13%				16%				14%				10%				13%				12%				13%				12%				10%				12%
Database and Middleware Revenues			18%				18%				18%				10%				15%				11%				10%				11%				8%				10%
APPLICATIONS REVENUES
New software licenses		$	349			$	579			$	639			$	1,042			$	2,609			$	428			$	569			$	658			$	1,279			$	2,935
Software license updates and product support			1,134				1,202				1,217				1,298				4,851				1,312				1,279				1,275				1,324				5,191
Applications Revenues		$	1,483			$	1,781			$	1,856			$	2,340			$	7,460			$	1,740			$	1,848			$	1,933			$	2,603			$	8,126
AS REPORTED GROWTH RATES
New software licenses			10%				21%				34%				22%				23%				23%				(2%	)			3%				23%				13%
Software license updates and product support			8%				8%				10%				16%				10%				16%				6%				5%				2%				7%
Applications Revenues			8%				12%				17%				18%				14%				17%				4%				4%				11%				9%
CONSTANT CURRENCY GROWTH RATES (2)
New software licenses			10%				22%				31%				16%				20%				19%				(1%	)			3%				27%				14%
Software license updates and product support			9%				9%				9%				10%				9%				7%				2%				2%				5%				4%
Applications Revenues			9%				13%				16%				12%				13%				10%				1%				3%				15%				7%

 

 

(1)	The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011 and 2010 for the fiscal 2012 and fiscal 2011 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

9

---

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

SUPPLEMENTAL GEOGRAPHIC NEW SOFTWARE LICENSE AND HARDWARE SYSTEMS PRODUCTS REVENUES ANALYSIS (1)

($ in millions)

 

		Fiscal 2011																				Fiscal 2012
		Q1				Q2				Q3				Q4				TOTAL				Q1				Q2				Q3				Q4				TOTAL
AMERICAS
Database & Middleware		$	446			$	671			$	755			$	1,284			$	3,155			$	478			$	669			$	808			$	1,337			$	3,291
Applications			212				359				355				580				1,507				249				358				420				789				1,816
New Software License Revenues		$	658			$	1,030			$	1,110			$	1,864			$	4,662			$	727			$	1,027			$	1,228			$	2,126			$	5,107
Hardware Systems Products Revenues		$	543			$	602			$	506			$	599			$	2,248			$	475			$	496			$	410			$	498			$	1,880
AS REPORTED GROWTH RATES
Database & Middleware			44%				36%				40%				14%				28%				7%				0%				7%				4%				4%
Applications			14%				26%				26%				20%				22%				18%				0%				18%				36%				21%
New Software License Revenues			33%				32%				35%				16%				26%				10%				0%				11%				14%				10%
Hardware Systems Products Revenues			*				*				287%				(3%	)			201%				(12%	)			(17%	)			(19%	)			(17%	)			(16%	)
CONSTANT CURRENCY GROWTH RATES (2)
Database & Middleware			43%				36%				39%				12%				27%				6%				1%				8%				7%				6%
Applications			14%				26%				24%				18%				20%				16%				1%				19%				38%				21%
New Software License Revenues			32%				32%				34%				14%				24%				9%				1%				11%				16%				11%
Hardware Systems Products Revenues			*				*				285%				(4%	)			199%				(13%	)			(17%	)			(18%	)			(16%	)			(16%	)
EUROPE / MIDDLE EAST / AFRICA
Database & Middleware		$	279			$	426			$	505			$	925			$	2,137			$	322			$	443			$	535			$	849			$	2,150
Applications			73				148				197				308				724				118				141				158				317				734
New Software License Revenues		$	352			$	574			$	702			$	1,233			$	2,861			$	440			$	584			$	693			$	1,166			$	2,884
Hardware Systems Products Revenues		$	338			$	329			$	330			$	341			$	1,337			$	344			$	272			$	265			$	260			$	1,140
AS REPORTED GROWTH RATES
Database & Middleware			25%				(1%	)			11%				23%				15%				15%				4%				6%				(8%	)			1%
Applications			(19%	)			23%				47%				18%				20%				63%				(4%	)			(20%	)			3%				1%
New Software License Revenues			12%				5%				19%				22%				16%				25%				2%				(1%	)			(5%	)			1%
Hardware Systems Products Revenues			*				*				246%				(13%	)			176%				2%				(17%	)			(20%	)			(24%	)			(15%	)
CONSTANT CURRENCY GROWTH RATES (2)
Database & Middleware			32%				7%				12%				9%				12%				5%				5%				8%				0%				3%
Applications			(16%	)			31%				46%				7%				16%				55%				(3%	)			(18%	)			10%				4%
New Software License Revenues			18%				12%				20%				9%				13%				15%				3%				1%				2%				4%
Hardware Systems Products Revenues			*				*				246%				(21%	)			165%				(11%	)			(17%	)			(18%	)			(18%	)			(16%	)
ASIA PACIFIC
Database & Middleware		$	212			$	323			$	315			$	485			$	1,334			$	270			$	367			$	373			$	520			$	1,530
Applications			64				72				87				154				378				61				70				80				173				385
New Software License Revenues		$	276			$	395			$	402			$	639			$	1,712			$	331			$	437			$	453			$	693			$	1,915
Hardware Systems Products Revenues		$	198			$	181			$	199			$	217			$	797			$	210			$	185			$	194			$	219			$	807
AS REPORTED GROWTH RATES
Database & Middleware			19%				27%				28%				20%				23%				28%				14%				19%				7%				15%
Applications			54%				(1%	)			45%				41%				33%				(4%	)			(4%	)			(8%	)			13%				2%
New Software License Revenues			26%				21%				32%				24%				25%				20%				11%				13%				8%				12%
Hardware Systems Products Revenues			*				*				325%				(4%	)			191%				6%				2%				(3%	)			1%				1%
CONSTANT CURRENCY GROWTH RATES (2)
Database & Middleware			13%				22%				20%				8%				15%				15%				12%				16%				11%				13%
Applications			47%				(5%	)			34%				27%				24%				(11%	)			(6%	)			(9%	)			21%				3%
New Software License Revenues			19%				16%				23%				12%				16%				9%				8%				11%				13%				11%
Hardware Systems Products Revenues			*				*				295%				(13%	)			173%				(5%	)			(1%	)			(6%	)			1%				(3%	)
TOTAL COMPANY
Database & Middleware		$	937			$	1,420			$	1,575			$	2,694			$	6,626			$	1,070			$	1,479			$	1,716			$	2,706			$	6,971
Applications			349				579				639				1,042				2,609				428				569				658				1,279				2,935
New Software License Revenues		$	1,286			$	1,999			$	2,214			$	3,736			$	9,235			$	1,498			$	2,048			$	2,374			$	3,985			$	9,906
Hardware Systems Products Revenues		$	1,079			$	1,112			$	1,035			$	1,157			$	4,382			$	1,029			$	953			$	869			$	977			$	3,827
AS REPORTED GROWTH RATES
Database & Middleware			32%				21%				27%				18%				23%				14%				4%				9%				0%				5%
Applications			10%				21%				34%				22%				23%				23%				(2%	)			3%				23%				13%
New Software License Revenues			25%				21%				29%				19%				23%				17%				2%				7%				7%				7%
Hardware Systems Products Revenues			*				*				279%				(6%	)			191%				(5%	)			(14%	)			(16%	)			(16%	)			(13%	)
CONSTANT CURRENCY GROWTH RATES (2)
Database & Middleware			32%				23%				26%				10%				19%				8%				4%				10%				5%				6%
Applications			10%				22%				31%				16%				20%				19%				(1%	)			3%				27%				14%
New Software License Revenues			25%				23%				27%				12%				19%				11%				3%				8%				11%				8%
Hardware Systems Products Revenues			*				*				274%				(11%	)			184%				(11%	)			(14%	)			(16%	)			(13%	)			(14%	)

 

 

(1)	The sum of the quarterly financial information may vary from year-to-date financial information due to rounding.

 

(2)

We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2011 and 2010 for the fiscal 2012 and fiscal 2011 constant currency growth rate calculations presented, respectively, rather than the actual exchange rates in effect during the respective periods.

 

*	Not meaningful

 

10

---

APPENDIX A

ORACLE CORPORATION

FISCAL 2012 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

 

•

New software licenses, software license updates and product support and hardware systems support deferred revenues: Business combination accounting rules require us to account for the fair values of cloud software subscription contracts (included in new software licenses revenues), software license updates and product support contracts and hardware systems support contracts assumed in connection with our acquisitions. Because these contracts are generally one year in duration, our GAAP revenues generally for the one year period subsequent to our acquisition of a business do not reflect the full amount of revenues on these assumed cloud software subscription contracts and support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment to our new software licenses revenues, software license updates and product support revenues and hardware systems support revenues is intended to include, and thus reflect, the full amount of such revenues. We believe the adjustment to these revenues is useful to investors as a measure of the ongoing performance of our business. We have historically experienced high renewal rates on our software license updates and product support contracts and our objective is to increase the renewal rates on acquired and new cloud software subscriptions and hardware systems support contracts; however, we cannot be certain that our customers will renew our cloud software subscriptions contracts, software license updates and product support contracts or our hardware systems support contracts.

 

•

Hardware systems products expenses: We have excluded the effects of the fair value adjustments to our inventories acquired from Sun that were sold to customers in fiscal year 2011, which resulted in the exclusion of these adjustments from our hardware systems products expenses and net income measures during fiscal year 2011. Business combination accounting rules require us to account for inventories assumed from our acquisitions at their fair values. The non-GAAP adjustment to our hardware systems products expenses is intended to reflect the hardware systems products expenses that would have been otherwise recorded by Sun as a standalone entity upon the sale of these inventories. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we do not expect the fair value adjustments to our inventories to recur in future periods with respect to the Sun acquisition and, therefore, we expect that these adjustments will not impact our future operating expenses. Investors should note that other factors may affect the future values of our inventories and hardware systems products expenses. If we assume inventories in future acquisitions, we will be required to assess their fair values, which may result in fair value adjustments to those inventories.

 

•

Stock-based compensation expenses: We have excluded the effect of stock-based compensation expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

 

•

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

 

•

Acquisition related and other expenses; and restructuring expenses: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses from our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of personnel related costs for transitional employees, other acquired employee related costs, stock-based compensation expenses (in addition to the stock-based compensation expenses described above), integration related professional services, certain business combination adjustments including adjustments after the measurement period has ended and changes in fair value of contingent consideration payable, and certain other operating expenses, net. Substantially all of the stock-based compensation expenses included in acquisition related and other expenses resulted from unvested options assumed in acquisitions whose vesting was fully accelerated upon termination of the employees pursuant to the original terms of those options. Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Although acquisition related expenses and restructuring expenses generally diminish over time with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions.

 

11