UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended May 31, 20122015

OR

For the transition period from            to            

Commission file number: 000-51788001-35992

Oracle Corporation

(Exact name of registrant as specified in its charter)

(650) 506-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  x    NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES  ¨    NO  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The aggregate market value of the voting stock held by non-affiliates of the registrant was $119,072,791,000$136,863,594,000 based on the number of shares held by non-affiliates of the registrant as of May 31, 2012,2015, and based on the closing sale price of common stock as reported by the NASDAQ Global Select MarketNew York Stock Exchange on November 30, 2011,28, 2014, which is the last business day of the registrant’s most recently completed second fiscal quarter. This calculation does not reflect a determination that persons are affiliates for any other purposes.

Number of shares of common stock outstanding as of June 20, 2012: 4,882,506,000.18, 2015: 4,336,077,000.

Documents Incorporated by Reference:

Portions of the registrant’s definitive proxy statement relating to its 20122015 annual stockholders’ meeting are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

ORACLE CORPORATION

FISCAL YEAR 20122015

FORM 10-K

ANNUAL REPORT

TABLE OF CONTENTS

Cautionary Note on Forward-Looking Statements

For purposes of this Annual Report, the terms “Oracle,” “we,” “us” and “our” refer to Oracle Corporation and its consolidated subsidiaries. This Annual Report on Form 10-K contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may be preceded by, followed by or include the words “expects,” “anticipates,

“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “should,” “is designed to” and similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about our business that could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included elsewhere in this Annual Report and as may be updated in filings we make from time to time with the U.S. Securities and Exchange Commission (the SEC), including the Quarterly Reports on Form 10-Q to be filed by us in our fiscal year 2013,2016, which runs from June 1, 20122015 to May 31, 2013.2016.

We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New information, future events or risks could cause the forward-looking events we discuss in this Annual Report not to occur. You should not place undue reliance on these forward-looking statements, which reflect our opinionsexpectations only as of the date of this Annual Report.

PART I

Item 1.    Business

General

We are the world’s largest provider of enterprise software and a leading provider of computer hardwareOracle Corporation provides products and services.services that address all aspects of corporate information technology (IT) environments—application, platform and infrastructure—and are available to customers either via cloud computing or on-premises deployment models. Our software, hardware systems, and services businesses develop, manufacture, market, host and supportproducts include database and middleware software, applicationsapplication software, cloud infrastructure software and hardware systems (Oracle Engineered Systems, servers, storage, networking and industry specific products), along with the latter consisting primarily of computer serversupport and storage products. Our businesses provide products and services that are built upon industry standards, are engineered to work together or independently within existing customer information technology (IT) environments, and run securely on a wide range of customer IT environments, including cloud computing environments.

Cloud computing environments provide on demand access to a shared pool of computing resources in a scalable, self-service manner, delivering advantages in speed, agility and efficiency. Cloud computing has evolved from technologies and services that Oracle has provided for many years, including clustering, server virtualization, Service-Oriented Architecture (SOA), shared services, large-scale management automation, and more recently, engineered systems. Our secure, reliable, and scalable product offerings are designed to improve business efficiencies at a lower total cost of ownership.related services. We seek to be an industry leader in each of the product categories in which we compete, and to expand into new and emerging markets.

We believe our ability to offer our customers choice and flexibility in the manner in which they deploy our products and services—while maintaining enterprise-grade reliability, security, and interoperability based upon industry standards—is important to our corporate strategy. Oracle Fusion Applications, for example, offerover 400,000 worldwide customers a choice of deployment models to runbest suit their needs including (1) the deployment of our standards-based software applications in on-premiseproducts via our Oracle Cloud offerings, (2) the acquisition of Oracle products and services for an on-premises IT environment or (3) a mix of these two models.

For customers opting for a cloud computing model, Oracle offers a wide range of services in all three primary layers of the cloud: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Our Oracle Cloud offerings are designed to be: rapidly deployable to enable customers shorter time to innovation; easily maintainable to reduce integration and testing work; and cost effective by requiring lower upfront customer investment. Our Oracle Cloud offerings integrate the software, hardware and services on the customers’ behalf in IT environments that we deploy, support and manage for the customer. We are a leader in the core technologies of cloud IT environments, including database and middleware software as well as enterprise applications, virtualization, clustering, large-scale systems management and related infrastructure. Our products and services are the building blocks of our Oracle Cloud services, our partners’ cloud services and our customers’ cloud IT environments.

In addition to offering a broad spectrum of cloud products and services, Oracle for decades has developed and sold its products and services to our customers worldwide for use in their global data centers and on-premises IT environments. Oracle Cloud is a familyAn important element of our cloud-based software subscription offerings that provides accesscorporate strategy is to select Oracle software applicationscontinue our investments in, and software platforms on a subscription basis in a secure, standards-based cloud computing environment. Oracle Cloud includes software applications as a service, such as Oracle Fusion Human Capital Management (HCM) Cloud Service and Oracle Fusion Customer Relationship Management (CRM) Cloud Service, and software platform services such as Oracle Database Cloud Service and Oracle Java Cloud Service, among others.

We believe our internal growth and continued innovation with respect to, our products and services that we offer through our software and cloud, hardware and services businesses are the foundation of our long-term strategic plans.businesses. In each of fiscal 20122015, 2014 and 2011,2013, we invested $4.5$5.5 billion, $5.2 billion and in fiscal 2010, we invested $3.3$4.9 billion, respectively, in research and development to enhance our existing portfolio of products and services and to develop new products and services. We have a deep understanding as to how all components within IT environments—application, platform and infrastructure—interact and function with one another. We focus our development efforts on improving the performance, operation and integration of these differing technologies to make them more cost-effective and easier to deploy, manage and maintain for our customers and to improve their computing performance relative to our competitors. After purchasing Oracle products and services, customers can continue to take advantage of Oracle’s research and development investments and deep IT expertise by purchasing and renewing Oracle support offerings, which may include product enhancements that we periodically deliver to our Oracle E-Business Suite, Siebel, PeopleSoft and JD Edwards application software products, among others, or by renewing their SaaS, PaaS and IaaS contracts with us.

Oracle customers are increasingly electing to run their IT environments using our suite of Oracle Cloud offerings. As customers deploy with the Oracle Cloud, many are adopting a hybrid IT model whereby certain of their IT resources are deployed and managed through the Oracle Cloud, while other of their IT resources are deployed and managed on-premises, and both sets of resources can be managed as one. We focus the engineering of our hardwareproducts and software productsservices to make them work together more effectivelybest connect these different deployment models to enable flexibility, ease, agility, compatibility, extensibility and deliver improved computing performance, reliability,seamlessness.

A selective and security to our customers. For example, Oracle Engineered Systems, which include our Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, and SPARC SuperCluster products, amongst others, combine certain of our hardware and software offerings to provide engineered systems that increase computing performance and reduce storage requirements relative to our competitors’ products, creating time savings, efficiencies, and operational cost advantages for our customers.

We also believe that an active acquisition program is ananother important element of our corporate strategy as it strengthensstrategy. We believe our competitive position, enhancesacquisitions enhance the products and services that we can offer to customers, expandsexpand our customer base, providesprovide greater scale to accelerate innovation, growscontribute to our revenues and earnings, and increasesincrease stockholder value. In recent years, we have invested billions of dollars to acquire a number of companies, products, services and technologies that add to, are complementary to, or have otherwise enhanced our existing offerings. We expect to continue to acquire companies, products, services and technologies to further our corporate strategy.

We are organized intohave three businesses—businesses that deliver our application, platform and infrastructure technologies: software and cloud, hardware systems, and services—which areservices. These businesses can be further divided into certain operating segments. Oursegments (Note 16 of Notes to Consolidated Financial Statements, included elsewhere in this Annual Report, provides additional information related to our operating segments):

Oracle Corporation was incorporated in 2005 as a Delaware corporation and is the successor to operations originally begun in June 1977.

OracleApplication, Platform and Cloud ComputingInfrastructure Technologies

Our cloud computing strategy offers customers a broadOracle’s comprehensive portfolio of enterprise-grade softwareapplication, platform and hardware productsinfrastructure technologies address an organization’s business, infrastructure and services thatdevelopment IT requirements. Our applications, platform and infrastructure technologies are secure, scalable, and reliable, and based upon industry standards and are designed to be enterprise grade, reliable, scalable and secure. We offer these technologies through our software and cloud, hardware and services businesses and deliver them through flexible and interoperable deployment models that enable interoperabilitycustomer choice and portability. Additionally,best meet customer IT needs.

Application and Platform Technologies

Our application and platform technologies consist of comprehensive software and cloud offerings including our SaaS and PaaS offerings, Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others, and related support.

Our application and platform technologies are substantially built on standards-based architectures that are designed to help customers reduce the cost and complexity of their IT infrastructure. Our commitment to industry standards results in software that works in customer environments with Oracle or non-Oracle hardware or software components and that can be adapted to meet specific industry or business needs. This approach is designed to support customer choice and reduce customer risk. Our software offerings are substantially designed to operate on both single server and clustered server configurations for cloud or on-premises IT environments, and to support a choice of operating systems including Oracle Solaris, Oracle Linux, Microsoft Windows and third party UNIX products, among others.

Our application and platform technologies are marketed, sold and delivered through our software and cloud business, which includes our new software licenses and cloud software subscriptions segment and software license updates and product support segment, among others. New software licenses and cloud software subscriptions revenues represented 26% of our total revenues in fiscal 2015 and 28% in each of fiscal 2014 and 2013. Software license updates and product support revenues represented 49%, 47% and 46% of our total revenues in fiscal 2015, 2014 and 2013, respectively.

Application Technologies

Our application technologies are available through the purchase of an on-premises software license or via subscription to our Oracle SaaS offerings. Regardless of the deployment model selected, our application technologies are designed to reduce the risk, cost and complexity of our customers’ IT infrastructures, while supporting customer choice with flexible deployment models that readily enable agility, compatibility and extendibility.

Our application technologies are designed using an industry standards-based architecture to manage and automate core business functions across the enterprise, as well as to help customers differentiate and innovate in those processes unique to their industries or organizations. In addition to applications that are deployable to meet a number of business automation requirements across a broad range of industries, we also offer industry-specific applications through a focused strategy of investments in internal development and strategic acquisitions. Our industry specific applications provide solutions to customers in the communications, engineering and construction, financial services, healthcare, hospitality and retail, manufacturing, public and utilities sectors, among others. Our ability to offer applications to address industry specific complex processes provides us an opportunity to expand our customers’ knowledge of our broader product offerings and address customer specific technology challenges.

Oracle Software as a Service (SaaS)

Our broad spectrum of SaaS offerings provides customers a pragmatic roadmap to adopt the cloud computingchoice of software applications that are delivered via a cloud-based IT environment that we host, manage and support. Our SaaS offerings are built upon open industry standards such as SQL, Java and HTML5 for easier application portability, integration and development. Our SaaS offerings include a broad suite of modular, next-generation cloud software applications that span core business functions including human capital management (HCM), customer experience (CX), enterprise resource planning (ERP), enterprise performance management (EPM) and supply chain management (SCM), among others. We also offer a number of cloud-based industry solutions to address specific customer needs within certain industries.

We believe the comprehensiveness of our SaaS offerings provides greater benefit to our customers and differentiates us from many of our competitors that offer more limited or specialized cloud-based applications. Our SaaS offerings are designed to be interoperable with one another, thereby limiting the integration and tuning of multiple cloud applications from multiple vendors. Our SaaS offerings are designed to deliver secure data isolation and flexible upgrades, self-service access controls for users, a Service-Oriented Architecture (SOA) for integration with on-premises systems, built-in social, mobile and business insight capabilities, and a high performance, high availability infrastructure based on our infrastructure technologies including Oracle Engineered Systems. These SaaS capabilities are designed to simplify IT environments and enable customers to focus resources on business growth opportunities.

Oracle Human Capital Management Cloud

Our HCM cloud applications are designed to be complete and integrated to help organizations find, grow and retain the best fits their needs, whether that is a “private”talent, enable collaboration, provide complete workforce insights, increase operational efficiency and enable people to connect from any device. Oracle HCM Cloud delivers global human resources, workforce rewards, workforce management and talent management cloud or a “public” cloud. Private cloudsservices.

Oracle Enterprise Resource Planning Cloud

Our ERP cloud applications are exclusivedesigned to a single organization, whereas “public” cloudsbe complete and integrated to help organizations achieve business insight, improve workforce productivity and operate globally. Oracle ERP Cloud delivers financial management, financial reporting, procurement and project portfolio management cloud services.

Oracle Customer Experience Cloud

Our CX cloud applications are used by multipledesigned to be complete and integrated to help organizations on a shared basisdeliver consistent and hostedpersonalized customer experiences across all channels, touch points and managed by a third-party service provider.interactions. Our enterprise-grade software and hardware products and services for private and publicCX cloud computing environmentsapplications include, among others:

Oracle SPARC SuperCluster products, and whichEnterprise Performance Management Cloud

Our EPM cloud applications are designed to be foundationsintegrated to help organizations improve and simplify enterprise performance reporting and enterprise planning processes. Oracle EPM Cloud delivers financial and management reporting and planning and budgeting cloud services.

Oracle Supply Chain Management Cloud

Our SCM cloud applications are designed to help organizations optimize their supply chain and innovate products quickly. Oracle SCM Cloud delivers transportation and global trade management, inventory and cost management, innovation management and product development cloud services.

Oracle Cloud Industry Solutions

Oracle Cloud Industry Solutions are industry specific SaaS applications that are designed to address the distinct requirements of the communications, financial services, healthcare, hospitality and retail, manufacturing and utilities sectors, among others.

Oracle Data as a Service

Oracle Data as a Service (DaaS) provides a centralized way to source, manage and furnish external data to business users through a cloud service for cloud computingmarketing and customer intelligence purposes. Oracle DaaS offerings connect business users and applications to a rich set of information to inform business actions with a vendor-agnostic approach so customers can activate the data in an application or engine of choice.

Oracle Applications

We license Oracle Applications software for use in on-premises, data center and related IT environments to manage and automate core business functions across the enterprise including human capital and talent management; customer experience and customer relationship management; financial management and governance, risk and compliance; procurement; project portfolio management; supply chain management; business analytics and enterprise performance management; and industry specific applications, among others. Our Oracle Applications software strategy is designed to provide customers with complete choice and a secure path to benefit from the latest technology advances.

Our Oracle Applications Unlimited program is Oracle’s commitment to ongoing investment and innovation in our current application offerings including our Oracle E-Business Suite, Siebel, PeopleSoft and JD Edwards application software products, among others. Since announcing the Oracle Applications Unlimited program in 2005, we have delivered major releases of all application product lines by incorporating pre-integratedcombining business functionality with innovative technologies, providing customers with more adaptive industry processes, business intelligence and optimized combinations of hardwareoptimal end-user productivity.

Platform Technologies

Our comprehensive platform technologies include license and subscription based database, middleware and development software that deliver high performance efficientlyofferings including Oracle Database software, the world’s most popular enterprise database, and atJava, the computer industry’s most widely-used software development language, among others.

Our platform technologies are designed to provide a lowercost-effective, standards-based, high-performance platform for running and managing business applications for midsize businesses, as well as large, global enterprises. Our customers are increasingly focused on reducing the total cost of ownership;their IT infrastructure and we believe that our platform technologies help them achieve this goal.

infrastructure management, the use of software updates and support), platform-as-a-service (PaaS, an application development and deployment platform delivered as a service to developers who use the platform to build, deploy and manage applications) and infrastructure-as-a-service (IaaS, which consists of computing servers, storage and networking delivered as a service) clouds.

Oracle CloudService (PaaS)

Oracle CloudPaaS is a family of our cloud-based software subscription offerings that provides our customersdesigned to deliver Oracle Database, Java and other platform services in the cloud to enable developers to extend applications, including Oracle SaaS applications, or build new applications. Customers and partners subscription-based, self-service access to certain ofcan use our databaseopen, standards based platform services that are based on Oracle WebLogic Server and middleware, and applications software. Oracle Cloud provides many common services including: resource management and isolation, security, data exchange and integration, virus scanning, and centralized self-service monitoring.

Oracle Cloud provides customers with flexible deployment models to run our business applications in cloud computing or on-premise IT environments, and includes Oracle Fusion CRM Cloud Service, Oracle Fusion HCM Cloud Service and the Oracle Social Network. We also offer certain software applications via subscription-based, cloud computing delivery models including Oracle RightNow Customer Experience and Oracle Taleo Talent Management Cloud Service, among others.

Oracle Cloud also provides our software platforms as services including Oracle Java Cloud Service and Oracle Database Cloud Service. Oracle Java Cloud Service provides customers with an open, standards-based Javaservice, including tools for rapid application development, flexible cloud-based file sharing and deployment platform built on Oracle’s WebLogic Server functionality incollaboration, intuitive business analysis and reporting, and mobile device connectivity.

We believe our PaaS offerings are a large opportunity for us to expand our software and cloud environmentbusiness. We believe customers increasingly recognize the value of access to Oracle Database, Oracle Fusion Middleware and Java via a low cost, rapidly deployable, flexible and interoperable services model that we manage and offermaintain on their behalf. We believe we can market and sell our PaaS offerings to our extensive installed base of database and middleware customers, via a subscription-based arrangement. Customers and partners are able to use standardcurrent and future users of our popular Java Integrated Development Environments such as software development language, among others.

Oracle JDeveloper, NetBeans and Eclipse to create applications that can then be deployed on the Oracle JavaDatabase Cloud Service. Services

Oracle Database Cloud Service provides customers with access to the Oracle Database functionality invia a cloud environment that we managecomputing IT model and offer to customers via a subscription-based arrangement. customer choice of a dedicated database instance with direct network connections and full administrative control or a dedicated schema with a full development and deployment platform managed by Oracle.

Oracle Database Backup Service is a secure, scalable, on-demand storage solution for backing up Oracle databases to an off-site storage location in the cloud.

Oracle Business Intelligence Cloud Service

Oracle Business Intelligence Cloud Service includes the Oracle Application Express (APEX) application development environment andis a set ofcloud-based, enterprise-class analytics platform for creating business productivityintelligence applications that are designed to convert customer data into business insight, upon which these customers can optimize decision-making.

Oracle Java Cloud Service

Oracle Java Cloud Service is a complete platform and infrastructure cloud solution for building, deploying and managing Java EE applications. Oracle Java Cloud Service provides easy, rapid and agile deployment of any Java application—all on top of infrastructure provided by Oracle.

Oracle Developer Cloud Service

Oracle Developer Cloud Service is an easy-to-use, automatically provisioned enterprise development platform deployed in the cloud that supports the complete software development lifecycle.

Oracle Documents Cloud Service

Oracle Documents Cloud Service is an enterprise level, content collaboration solution that enables information to be easyaccessed, uploaded and shared via a cloud computing IT environment that is provided and secured by Oracle.

Oracle Messaging Cloud Service

Oracle Messaging Cloud Service is a cloud-based, reliable messaging service that enables communication between software components both on-premises and in the Oracle Cloud using standard interfaces.

Oracle Database

We license our Oracle Database software to usecustomers, which is designed to enable reliable and secure storage, retrieval and manipulation of all forms of data, including: transactional data, business information and analytics; semi-structured and unstructured data in the form of weblogs, text, social media feeds, XML files, office documents, images, video and spatial images; and other specialized forms of data, such as graph data. Oracle Database software is used for a variety of purposes, including with packaged applications and custom applications for transaction processing, data warehousing and business intelligence and as a document repository or specialized data store. Security continues to be a critical characteristic of the Oracle Database and our latest version, Oracle Database 12c, includes a number of security enhancements and new features including, among others, encryption of data in motion, conditional auditing, real application security, and transparent sensitive data protection. All security capabilities available are compatible with Oracle Database 12c’s new Oracle Multitenant architecture option, which enables customers to quickly and efficiently address the unique security requirements of each of their database instances.

A number of optional add-on products are available with Oracle Database Enterprise Edition software to address specific customer requirements, including:

In addition to Oracle Database, we also offer a portfolio of specialized database software products to address particular customer requirements, including the following:

Big Data

Oracle offers big data solutions to complement and extend its Oracle Database software offerings. Big data generally refers to a massive amount of unstructured, streaming and structured data that is so large that it is difficult to process using traditional IT techniques. As businesses drive more of their critical operations and information management through IT solutions, the volume of this data generated by businesses is increasing at unprecedented levels.

We believe most businesses view big data as a high-value source of business intelligence that can be quickly provisioned.used to gain new insights into customer behavior, anticipate future demand more accurately, align workforce deployment with business activity forecasts and accelerate the pace of operations, among others. Oracle offers a comprehensive portfolio of products and services to help enterprises capture, manage, and analyze big data alongside an enterprise’s existing enterprise and streaming data.

Our big data solutions for capturing unstructured, streaming and structured data complement existing Oracle Database environments and include Oracle NoSQL Database and popular open source software such as the Hadoop File System. Oracle Data Integration and Oracle Big Data Connectors are designed to easily and non-invasively integrate data from Hadoop file systems or Oracle NoSQL databases and Oracle databases to enable a data warehouse to further organize, analyze, interpret, report on and act on information from these high volume data sources.

We offer Oracle Business Analytics products that are designed to leverage big data and enterprise data to enable organizations to analyze the data and discover new ways to strategize, plan, optimize business operations and capture new market opportunities. Oracle Business Analytics products include data discovery software, enterprise performance management and analytic application software, business intelligence software, and predictive analytics and self-learning decision optimization software. The Oracle Exalytics In-Memory Machine is designed to run analytic environments at optimal performance and scale, which is ideal for use with big data environments.

Oracle Fusion Middleware

We license our Oracle Fusion Middleware software, which is a broad family of integrated application infrastructure software products. These products are designed to form a reliable and scalable foundation on which customers can build, deploy, secure, access and integrate business applications and automate their business processes. Built with our Java technology platform, Oracle Fusion Middleware products can be used as a foundation for custom, packaged and composite applications—or applications that can be deployed in cloud environments.

Oracle Fusion Middleware software is designed to protect customers’ IT investments and work with both Oracle and non-Oracle database, middleware and application software through its open architecture and adherence to industry standards. Specifically, Oracle Fusion Middleware software is designed to enable customers to integrate Oracle and non-Oracle business applications, automate business processes, scale applications to meet customer demand, simplify security and compliance, manage lifecycles of documents and get actionable, targeted business intelligence; all while continuing to utilize their existing IT systems. In addition, Oracle Fusion Middleware software supports multiple development languages and tools, which enables developers to build and deploy web services, websites, portals and web-based applications.

Oracle Fusion Middleware software is available in various software products and suites, including the following:

Mobile Computing

Among its other middleware offerings, Oracle provides a wide range of software for mobile computing to address the development needs of businesses that are increasingly focused on delivering mobile device applications to their customers. For example, Oracle Mobile Platform enables developers to build and extend enterprise applications for popular mobile devices from a single code base. Oracle Mobile Platform supports access to native device services, enables offline applications and is designed to protect enterprise investments from future technology shifts. Oracle Mobile Security offers comprehensive mobile identity and application management for provisioning of trusted access. Oracle Business Intelligence Mobile provides business intelligence functionality, from interactive dashboards to location intelligence, while enabling users to initiate business processes from a mobile device.

Java

Java is the computer industry’s most widely-used software development language and is viewed as a global standard. The Java programming language and platform together represent one of the most popular and powerful development environments in the world, one that is used by millions of developers globally to develop business applications. Oracle Fusion Middleware software products and certain of our Oracle Applications are built using our Java technology platform, which we believe is a key advantage for our business.

Java is designed to enable developers to write software on a single platform and run it on many other different platforms, independent of operating system and hardware architecture. Java has been adopted by both independent software vendors (ISV) that have built their products on Java and by enterprise organizations building custom applications or consuming Java-based ISV products.

Software License Updates and Product Support

We seek to protect and enhance our customers’ current investments in Oracle application and platform technologies by offering proactive and personalized support services, including Oracle Lifetime Support and product enhancements and upgrades. Software license updates provide customers with rights to unspecified software product upgrades and maintenance releases and patches released during the term of the support period. Product support includes internet and telephone access to technical support personnel located in our global support centers, as well as internet access to technical content through “My Oracle Support”. Software license updates and product support contracts are generally priced as a percentage of the net new software license fees. Substantially all of our customers purchase software license updates and product support contracts when they acquire new software licenses and renew their software license updates and product support contracts annually.

Cloud Infrastructure as a Service (IaaS)

Our Oracle IaaS offerings, which are a part of our software and cloud business and represented 2% of total revenues in fiscal 2015 and 1% of total revenues in each of fiscal 2014 and 2013, provide deployment and management offerings for our software and hardware and related IT infrastructure, including:

Infrastructure Technologies

Oracle infrastructure technologies consist of our hardware systems products including Oracle Engineered Systems, servers, storage, networking, industry specific hardware, virtualization software, operating systems, management software and related hardware services including support. We also offer Oracle IaaS, which provides elastic compute and storage capabilities, among others.

Our infrastructure technologies help customers manage growing amounts of data and business requirements, meet increasing compliance and regulatory demands and reduce energy, space and operational costs. Our infrastructure technologies support many of the world’s largest on-premises and cloud IT environments, including the Oracle Cloud. Our infrastructure technologies are designed to seamlessly connect on-premises and cloud IT environments to further enable interoperability, interchangeability and extendibility. We design our infrastructure technologies to work in customer environments that may include other Oracle or non-Oracle hardware or software components. Our flexible and open approach provides Oracle customers with a broad range of choices in how they deploy our infrastructure technologies, which we believe is a priority for our customers.

We focus the operation and integration of our infrastructure technologies to make them easier to deploy, manage and maintain for our customers and to improve computing performance relative to our competitors’ offerings. For example, our Oracle Engineered Systems are designed to integrate multiple Oracle technology components to work together to deliver improved performance, availability, security and operational efficiency relative to our competitors’ products. These same Oracle technology components are tested together and supported together to streamline system deployment and maintenance cycles. We also engineer our hardware systems with virtualization and management capabilities to enable the rapid deployment and efficient management of cloud and on-premises IT infrastructures.

Our infrastructure technologies are substantially marketed, sold and delivered through our hardware business, which includes our hardware systems products segment and hardware systems support segment. Our hardware systems products revenues represented 8% of our total revenues in each of fiscal 2015, 2014 and 2013. Our hardware systems support revenues represented 6% of our total revenues in each of fiscal 2015, 2014 and 2013.

Oracle Engineered SystemsSoftware License Updates and Product Support

An important element ofWe seek to protect and enhance our corporate strategycustomers’ current investments in Oracle application and platform technologies by offering proactive and personalized support services, including Oracle Lifetime Support and product development efforts is to engineer our hardwareenhancements and software products together to deliver efficiencies that simplify our customers’ IT environments; provide increased IT performance, reliability, and security; and free up resources that customers can use to invest in innovation and competitive differentiation. Oracle Engineered Systems are a part of our hardware systems segment, and are pre-integrated products engineered to include multiple elements of Oracle software and hardware products. Oracle Engineered Systems provide the foundation for IT consolidation and cloud computing, and are designed to deliver high performance and scalability; provide faster time to production; reduce data storage costs; and enable customers to efficiently purchase, deploy and support their IT environments. All Oracle Engineered Systems are tested in the factory and delivered ready to run. These pre-integrated products are also designed to be upgraded effectively and efficiently. As integrated systems, Oracle Engineered Systems simplify routine maintenance, such as software patching, by providing a single solution that covers the entire system. Oracle Engineered Systems include Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In-Memory Machine, SPARC SuperCluster, Oracle Database Appliance, and Oracle Big Data Appliance.

Oracle Exadata Database Machine

Oracle Exadata Database Machine is a family of integrated software and hardware products that combines our database, storage and operating system software with our server, storage and networking hardware. Oracle Exadata Database Machine is designed to enable customers to consolidate databases, manage large volumes of data, improve query response times, and reduce costs by improving data storage and using fewer IT resources.

Oracle Exalogic Elastic Cloud

Oracle Exalogic Elastic Cloud is an engineered system that combines Oracle Fusion Middleware software with our hardware to run Java and non-Java applications andupgrades. Software license updates provide customers with an applications platform for cloud computing. Oracle Exalogic Elastic Cloud is designedrights to improveunspecified software product upgrades and maintenance releases and patches released during the performance of applications that run

on it and enable customers to consolidate multiple applications onto a single system that is designed to be scalable, reliable and secure.

Oracle Exalytics In-Memory Machine

The Oracle Exalytics In-Memory Machine is a single server that is designed to be configured for in-memory analytics for business intelligence workloads. The Oracle Exalytics In-Memory Machine features an optimized Oracle Business Intelligence Foundation Suite and Oracle TimesTen In-Memory Database. The Oracle Business Intelligence Foundation Suite takes advantage of large memory, processors, storage, networking, operating system and system configurationterm of the support period. Product support includes internet and telephone access to technical support personnel located in our global support centers, as well as internet access to technical content through “My Oracle Exalytics hardware. This optimization is designed to provide better query responsiveness, higher user scalabilitySupport”. Software license updates and lower total costproduct support contracts are generally priced as a percentage of ownership.

SPARC SuperCluster

Our SPARC SuperCluster is a general purpose engineered system that combines the computing powernet new software license fees. Substantially all of our SPARC processor, the performance and scalability of Oracle Solaris, the optimized database performance of Oracle Exadata storage and the accelerated middleware processing of the Oracle Exalogic Elastic Cloud. Oracle SPARC SuperCluster is designed to provide the scalability and performance demanded by a wide range of Oracle and non-Oracle enterprise workloads. It is an ideal mission-critical consolidation platform that is designed to run multiple tiers, from database to middleware to application, and to support multiple applications and operating systems side by side. SPARC SuperCluster enables faster deployment, increased systems utilization and reduced data center space and energy requirements.

Oracle Database Appliance

Oracle Database Appliance is an integrated, fault resilient system of software, servers, storage and networking in a single box that is designed to deliver high-availability database services for a wide range of homegrown and packaged online transaction processing (OLTP) and data warehousing applications. The Oracle Database Appliance is designed to enable enterprises to consolidate OLTP and data warehousing databases up to four terabytes in size.

Oracle Big Data Appliance

Oracle Big Data Appliance is an engineered system designed for acquiring, organizing and loading unstructured data into an Oracle database. By integrating the key components of a big data platform into a single product, Oracle Big Data Appliance is a scalable and supported big data infrastructure that reduces the risks of a custom built solution. Built using our industry-standard hardware, Oracle Big Data Appliance is installed and configured for high performance and availability.

Software, Hardware Systems and Services Businesses

Software Business

Our software business consists of our new software licenses segment andcustomers purchase software license updates and product support segment.

New Software Licenses

Thecontracts when they acquire new software licenses operating segmentand renew their software license updates and product support contracts annually.

Cloud Infrastructure as a Service (IaaS)

Our Oracle IaaS offerings, which are a part of our software and cloud business primarilyand represented 2% of total revenues in fiscal 2015 and 1% of total revenues in each of fiscal 2014 and 2013, provide deployment and management offerings for our software and hardware and related IT infrastructure, including:

Infrastructure Technologies

Oracle infrastructure technologies consist of our hardware systems products including Oracle Engineered Systems, servers, storage, networking, industry specific hardware, virtualization software, as well as applications software.operating systems, management software and related hardware services including support. We also offer Oracle IaaS, which provides elastic compute and storage capabilities, among others.

Our software solutionsinfrastructure technologies help customers manage growing amounts of data and business requirements, meet increasing compliance and regulatory demands and reduce energy, space and operational costs. Our infrastructure technologies support many of the world’s largest on-premises and cloud IT environments, including the Oracle Cloud. Our infrastructure technologies are designed to help customers reduce the costseamlessly connect on-premises and complexity of theircloud IT infrastructures by delivering solutions via an industry standards-based, integrated architecture. This standards-based architecture enablesenvironments to further enable interoperability, interchangeability and extendibility. We design our softwareinfrastructure technologies to work in customer environments that may include other Oracle or non-Oracle hardware or software components. ThisOur flexible and open approach is designed to support customer choice, to reduce customer risk and to be adapted to the specific needs of any industry or application. In this model, our database and certain of our middleware offerings are designed to manage and protectprovides Oracle customers with a customer’s underlying business information, while

application servers run enterprise applications that are designed to automate multiple business functions and provide intelligence in critical functional areas. Our software products are designed to operate on both single server and clustered server configurations for on-premise or cloud computing IT environments and to support a choice of operating systems, including, for example, Oracle Solaris, Oracle Linux, Microsoft Windows and third party UNIX products.

New software license revenues represented 27%, 26% and 28% of total revenues in fiscal 2012, 2011 and 2010, respectively.

Database and Middleware Software

Our database and middleware software provide abroad range of offerings that are designed to provide a cost-effective, high-performance platform for running and managing business applications for midsize businesses, as well as large, global enterprises. Our customers are increasingly focused on reducing the total cost of their ITchoices in how they deploy our infrastructure and we believe that our software offerings help them achieve this goal. Our software is designed to accommodate demanding, non-stop business environments using clustered middleware and database servers and storage. These clusters are designed to scale incrementally as required to address our customers’ IT capacity, satisfy their planning and procurement needs, support their business applications with a standardized platform architecture, reduce their risk of data loss and IT infrastructure downtime and efficiently utilize available IT resources to meet quality of service expectations.

New software license revenues from database and middleware products represented 70% of our new software license revenues in fiscal 2012 and 72% in each of fiscal 2011 and 2010.

Database Software

Oracle Database software is the world’s most popular enterprise database software. It is designed to enable reliable and secure storage, retrieval and manipulation of all forms of data, including: transactional data, business information, and analytics; semi-structured and unstructured data in the form of weblogs, text, social media feeds, XML files, office documents, images, video and spatial images; and other specialized forms of data, such as human genomic and medical data. Oracle Database software is used for a variety of purposes, including packaged applications, custom application development, OLTP applications, data warehousing and business intelligence, and as a document repository or specialized data store.

Oracle Database software is available in four editions: Enterprise Edition, Standard Edition, Standard Edition One and Express Edition. All editions are built using the same underlying code, which means that our database software can scale from small, single processor servers to clusters of multi-processor servers and our Oracle Exadata Database Machines.

We also offer customers in-memory database software, including Oracle TimesTen In-Memory, the world’s most popular in-memory database, and Oracle In-Memory Database Cache. Oracle TimesTen In-Memory Database is designed to deliver real-time data management and transaction processing speeds for performance-critical applications, from complex analytical queries and speed-of-thought data visualization, to mission-critical, industry-specific applications such as call centers, trading platforms, reservation systems, and smart meters. Oracle TimesTen In-Memory Database supports multiple computing platforms, is compatible with Oracle Database software, and can work as a standalone database at the applications tier. Oracle In-Memory Database Cache acts as a high performance cache for Oracle Database Enterprise Edition and is used to provide immediate access to historical data in existing Oracle Databases that are frequently accessed such as customer and user lists, open orders, and product catalogs.

A number of optional add-on products are available with Oracle Database Enterprise Edition software to address specific customer requirements. In the areas of performance and scalability, we offer Oracle Real Application Clusters, Oracle Advanced Compression and Oracle Partitioning software options. In the area of data security, we offer Oracle Advanced Security, Oracle Database Vault, Oracle Audit Vault and Oracle Database Firewall software options.

In addition to the four editions of Oracle Database, we also offer a portfolio of specialized database software products to address particular customer requirements, including:

Middleware Software

Oracle Fusion Middleware software is a broad family of integrated application infrastructure software products that is designed to form a reliable and scalable foundation on which customers can build, deploy, secure, access and integrate business applications and automate their business processes. Built with Oracle’s Java technology platform, Oracle Fusion Middleware products can be used as a foundation for custom, packaged and composite applications—or applications that can be deployed in private or public cloud environments.

Oracle Fusion Middleware software is designed to protect customers’ IT investments and work with both Oracle and non-Oracle database, middleware and applications software through its open architecture and adherence to industry standards such as Java Enterprise Edition (Java EE) and Business Process Execution Language (BPEL), among others.

By using Oracle Fusion Middleware software, we believe customers can better adapt to business changes rapidly, reduce their risks related to security and compliance, increase user productivity and drive better business decisions. Specifically, Oracle Fusion Middleware software is designed to enable customers to integrate heterogeneous business applications, automate business processes, scale applications to meet customer demand, simplify security and compliance, manage lifecycles of documents and get actionable, targeted business intelligence; all while continuing to utilize their existing IT systems. In addition, Oracle Fusion Middleware software supports multiple development languages and tools, which enables developers to build and deploy web services, websites, portals and web-based applications.

Oracle Fusion Middleware software is used to integrate, extend, rapidly configure and secure enterprise applications. Oracle Fusion Middleware integrates with Oracle Applications as well as other third party applications, including applications in clouds. Oracle Fusion Middleware software is also the foundation for Oracle Fusion Applications—providing customers greater benefits from a unified application platform.

Oracle Fusion Middleware software is available in various software products and suites, including the following functional areas:

Application Server and Cloud Application Foundation

The foundation of Oracle Fusion Middleware software is Oracle WebLogic Server—an application server that is compliant with the Java EE specification. Oracle WebLogic Server incorporates clustering and caching technology,

which increases application reliability, performance, security and scalability. In addition to Oracle WebLogic, Oracle combines cloud infrastructure components into the Oracle cloud application foundation, including Oracle Virtual Assembly Builder, Oracle Coherence, Oracle JRockit, Oracle Tuxedo and Oracle GlassFish Server.

Oracle Virtual Assembly Builder works with Oracle WebLogic Server to increase the efficiency of application virtualization and to enable users to quickly and easily design and deploy multi-tier applications to virtualized IT environments, both conventional and cloud. Oracle Coherence is an in-memory data grid solution that enables organizations to predictably scale applications by providing fast and reliable access to frequently used data. Oracle JRockit is a high performance Java Virtual Machine designed to run Java applications on multi-core processors with higher and more predictable performance. Oracle Tuxedo runs legacy, mainframe and non-Java applications written in the C, C++ and COBOL languages that have transaction reliability, scalability and performance requirements. Oracle GlassFish Server enhances the value of Oracle Fusion Middleware software for developers by accelerating development practices and decreasing application time-to-market.

Service-Oriented Architecture and Business Process Management

Service-Oriented Architecture is a software development and architecture methodology that creates a modular, re-usable approach to applications development; makes it easy to integrate systems with each other; and reduces the need for costly custom development. Oracle SOA Suite is a suite of middleware software products used to create, deploy and manage applications on a Service-Oriented Architecture including Oracle JDeveloper, Oracle BPEL Process Manager, Oracle Web Services Manager, Oracle Business Rules, Oracle Business Activity Monitoring and Oracle Service Bus. Oracle Business Process Management Suite is a suite of software that is designed to enable business and IT professionals to design, implement, automate and evolve business processes and workflows within and across organizations. Oracle SOA Governance is designed to maintain the security and integrity of our customers’ SOA deployments.

Business Intelligence

Oracle Business Intelligence (BI) is a comprehensive set of analytic software products designed to provide customers with the information they need to make better business decisions. Oracle’s Business Intelligence software products include Oracle BI Suite Enterprise Edition, a comprehensive query and analysis server; Oracle Essbase, an online analytical processing server; Oracle BI Publisher, a self-service production and operational reporting tool; and Oracle Real-Time Decisions, a real-time data classification and optimization solution. Users can access these tools from a variety of user interfaces including browser-based interactive dashboards; ad hoc query and analysis; proactive detection and alerts integrated with e-mail; Microsoft Office integration including support for Excel, Word and PowerPoint; and mobile analytics for mobile and smart phones.

Identity and Access Management

Oracle’s identity and access management software products are designed to enable customers to manage internal and external users, secure corporate information from potential software threats and streamline compliance initiatives while lowering the total cost of their security and compliance initiatives. These software products include a lightweight directory access protocol (LDAP) directory service to store and manage user identities and policies; identity provisioning to provision users and roles in multiple enterprise applications and systems; access management to manage access control and entitlements for customers, partners and employees; and identity analytics to audit and identify users attempting to access systems for which they are not authorized.

Data Integration

Oracle’s data integration offerings consist of Oracle GoldenGate, Oracle Data Integrator and Oracle Enterprise Data Quality products. Oracle GoldenGate is a high performance data movement and continuous availability solution designed to capture transaction records on one system and to move and apply them to other systems with low impact on system and network performance. Oracle Data Integrator is an extract-transform-load (ETL) solution that enables users to extract data from one system, transform it from the source system’s format to a target system’s format and load it into the target system (such as a data warehouse). Oracle Data Integrator also

includes big data capabilities to transform and load unstructured data from non-Oracle environments into Oracle Database or Oracle Exadata. Additionally, Oracle Enterprise Data Quality enables users to profile any type of data (customer or product-oriented) and to clean it using a variety of automated matching and cleansing rules making the data more reliable and more accurate.

Web Experience Management, Portals, Content Management and Social Networks

Oracle WebCenter is designed to deliver a complete user engagement platform for social business, connecting people and information. It brings together a broad portfolio of portal, web experience management, content, social and collaboration technologies, into a single product suite. Oracle WebCenter is designed to improve customer loyalty and sales by helping marketing-driven organizations deliver contextual and targeted web experiences to users and give employees readily available access to information and applications in the context of an interaction and business process through portals and composite applications. Oracle WebCenter helps people work together more efficiently through contextual collaboration tools that optimize connections among people, information and applications while ensuring users have access to the right information in the context of their daily business processes.

Oracle WebCenter Content is an enterprise content management software suite that is designed to enable users to capture, manage and publish information that is either unstructured, not easily readable or has not been stored, including documents, images, audio, video and a wide variety of other forms of digital content. Oracle WebCenter Sites enables marketers and business users to easily create and manage contextually relevant, social and interactive online experiences across multiple channels on a global scale. Oracle WebCenter Portal is a portal and composite applications solution that is designed to deliver intuitive user experiences for the enterprise that are seamlessly integrated with enterprise applications. Oracle WebCenter social, which includes Oracle Social Network and Oracle WebCenter Real-Time Collaboration, enables secure social networking and enterprise collaboration tools for the enterprise.

Development Tools

Oracle JDeveloper is an integrated software environment that is designed to facilitate rapid development of a variety of different types of applications using Oracle Fusion Middleware software and popular open source technologies. Oracle JDeveloper software provides support for developing Java applications; web services, composite SOA applications and business processes; rich user interfaces using AJAX/DHTML and Flash technologies; and websites using popular scripting languages. Oracle JDeveloper software also provides comprehensive application lifecycle management facilities including modeling, building, debugging, unit testing, profiling and optimizing applications and is integrated with the Oracle Application Development Framework software, which provides a declarative framework for building business applications and popular open source tools, including Eclipse and NetBeans.

Java

Java is the computer industry’s most widely-used software development language and is viewed as a global standard. The Java programming language and platform together represent one of the most popular and powerful development environments in the world, one that is used by millions of developers globally to develop business applications. Oracle Fusion Middleware software products and Oracle Fusion Applications are built using our Java technology platform, which we believe is a key advantagepriority for our business.customers.

Java isWe focus the operation and integration of our infrastructure technologies to make them easier to deploy, manage and maintain for our customers and to improve computing performance relative to our competitors’ offerings. For example, our Oracle Engineered Systems are designed to enable developersintegrate multiple Oracle technology components to write software on a single platformwork together to deliver improved performance, availability, security and run it on many other different platforms, independent of operatingoperational efficiency relative to our competitors’ products. These same Oracle technology components are tested together and supported together to streamline system deployment and maintenance cycles. We also engineer our hardware architecture. Java has been adopted by both independent software vendors (ISV) that have built their products on Javasystems with virtualization and by enterprise organizations building custom applications or consuming Java-based ISV products.

For customers, the Java platform is designed to enable a variety of compatible applications, independent of their vendor, and to support a global community of Java developers, support engineers and knowledge bases that can help customers reduce the risk of and time to deployment as well as the ongoing cost of ownership and maintenance.

There are three primary editions of Java (Standard, Enterprise and Micro) that support a broad spectrum of usage ranging from mobile phones to desktop computers to server applications. Java can also be found embedded in a variety of devices and machines, including printers, cars, airplanes, tablets, DVD players, set-top boxes, pens, smart meters and bank ATM machines; and JavaCard is designed for specialized use in smart cards. Certain of our products are built primarily to enable customers to run Java applications on and with them, such as Oracle WebLogic Server and Oracle Coherence. Many more of our products are built with and rely on Java, such as the Oracle Fusion Middleware software product family and Oracle Fusion Applications. We expect to continue to innovate and invest in Java technology for the benefit of customers and the Java community.

Management Software

Oracle Enterprise Manager is Oracle’s integrated enterprise IT management and cloud management family of products. Oracle Enterprise Manager is designed to combine the self-management capabilities built into Oracle products with its business-driven IT management capabilities to deliver a holistic approach toenable the rapid deployment and efficient management of cloud and on-premises IT management across the entire Oracle technology portfolio, including Oracle Databaseinfrastructures.

Our infrastructure technologies are substantially marketed, sold and Oracle Exadata, Oracle Fusion Middleware and Oracle Exalogic Elastic Cloud, Oracle Applications, Oracle Solaris, Oracle Linux, Oracle VM anddelivered through our complete hardware portfolio. Oracle Enterprise Manager is designed to manage Oracle’s softwarebusiness, which includes our hardware systems products segment and hardware portfolio whether deployed using traditional IT architectures or in cloud computing architectures. In both cases, Oracle Enterprise Manager is designed to provide a complete IT lifecycle management approach, including configuring elements of an IT environment, monitoring service levels; diagnosing and troubleshooting problems, patching and provisioning IT environments, managing compliance reporting, and providing change management in a unified way across physical and virtualized IT environments.

Virtualization Software

Oracle VM is server virtualization software for both Oracle SPARC and x86-based servers, and supports both Oracle and non-Oracle applications. Oracle VM software is designed to enable different applications to share a single physical system for higher utilization and efficiency, and simplify software deployment by enabling pre-configured software images to be created and rapidly deployed without installation or configuration errors.

Applications Software

Oracle Applications are designed using an industry standards-based, integrated architecture to manage and automate core business functions across the enterprise, as well as help customers differentiate and innovate in those processes unique to their industries or organizations. Oracle Applications are also designed to reduce the risk, cost, and complexitysystems support segment. Our hardware systems products revenues represented 8% of our customers’ IT infrastructures, while supporting customer choice and providing flexibility in deployment models and upgrade paths.

Through a focused strategy of investments in internal research and development and strategic acquisitions, we also provide industry-specific solutions for customers in a number of different industries, including communications, engineering and construction, financial services, health services, manufacturing, public sector, retail, and utilities. We continue to broaden the number of software applications that we offer on a subscription basis via a cloud computing environment to provide our customers with choice and flexibility in how they manage their software investments and software deployments. New software licensetotal revenues from applications software represented 30% of our new software license revenues in fiscal 2012 and 28% in each of fiscal 20112015, 2014 and 2010.

Oracle’s Applications strategy provides customers with a secure path to adopt2013. Our hardware systems support revenues represented 6% of our latest technology advances which are designed to improve the customer software experiencetotal revenues in each of fiscal 2015, 2014 and enable better business performance. Central to that strategy is Oracle’s Applications Unlimited program, which is our commitment to customer choice through ongoing investment and innovation in our current applications offerings. Oracle Fusion Applications build upon this commitment and are designed to work with and evolve customer investments in their existing applications portfolio. Oracle Lifetime Support helps ensure customers will continue to have a choice in upgrade paths based on their enterprise needs.2013.

We protect our customers’ current investments in Oracle Applications by delivering new product releases that incorporate customer-specific and industry-specific innovations across product lines. Since announcing our Applications Unlimited program in 2005, we have delivered major releases on all applications product lines by combining business functionality with innovative technologies such as role-based analytics, secure search, identity management, self-service and workflow to deliver adaptive industry processes, business intelligence and insights, and optimal end-user productivity.

Oracle Fusion Applications are part of a comprehensive suite of modular, next-generation software applications that enable efficient management of core business functions across the enterprise. Oracle Fusion Applications are designed using commercially-available technology standards such as Java and BPEL; the principles of SOA; and a common approach and architecture for the user experience, business intelligence, social networking and mobility. With their tailored user experience and embedded analytical capabilities, Oracle Fusion Applications are designed to increase user productivity and allow customers to manage functions across different environments more effectively. Using a SOA approach, Oracle Fusion Applications are engineered to provide customers with more flexibility to innovate and adopt next-generation technologies at their own pace, whether via one module, a product family, or an entire suite. Oracle Fusion Applications are engineered to be cloud-ready and thus offer flexible deployment options, including on-premise, public cloud, private cloud, or a combination of these options.

We also continue to offer and enhance Oracle Applications, including our Oracle E-Business Suite, Siebel, PeopleSoft, and JD Edwards product families. All Oracle Applications are enterprise-grade and based upon industry standards, and designed to automate core business processes and address industry-specific needs.

The primary applications software offerings include:

Human Capital Management

We offer a broad portfolio of Human Resource and Talent Management applications, and flexible deployment options for on-premise or cloud computing IT environments. Our complete and integrated offerings provide core human resource transactions, workforce service automation and delivery, and complete enterprise talent management. Our global, web-based, single system architecture is designed for organizations of every size, industry and region. In fiscal 2012, we acquired Taleo Corporation, a leading provider of cloud-based talent management software that helps organizations attract, develop, motivate, and retain human capital. We believe our portfolio of HCM solutions creates a broad offering for organizations to manage their human resource operations and employee careers, either via cloud offerings such as Oracle Fusion HCM Cloud Service and Oracle Taleo Talent Management service; or on-premise solutions, including Oracle Fusion HCM (which is also cloud ready), Oracle E-Business Suite HCM, and PeopleSoft HCM.

Customer Relationship Management

We offer a broad portfolio of CRM applications, including Siebel CRM, Oracle E-Business Suite CRM, PeopleSoft CRM, Oracle Fusion Applications for CRM, and Oracle RightNow CX Service Cloud, that are designed to help our customers manage their selling processes more efficiently; integrate marketing campaigns and content into their selling processes more effectively; and deliver high quality customer service across multiple channels, including call centers, web, and mobile devices. Our Oracle CRM On Demand and Siebel CRM offerings also provide many industry-specific features designed to support the specialized needs of users in key sectors, such as communications, consumer products, financial services, high technology, insurance, life sciences and the public sector. Customers may also elect to use our subscription-based CRM cloud offerings, including Oracle Fusion CRM Cloud Service and Oracle RightNow Customer Experience, among others.

Financials and Governance, Risk and Compliance

Our financial management and GRC solutions are designed to enable our customers to meet fiduciary and statutory requirements, more efficiently manage risk across a global enterprise, accelerate the credit-to-cash cycle of business transactions, track financial operations and cash flow through accounting and treasury functions and manage business performance. In addition to our portfolio of financial management applications from Oracle E-Business Suite, PeopleSoft, and JD Edwards, we also offer Oracle Fusion GRC, a component of the Oracle Fusion Applications suite, to provide unified intelligence and insight into all GRC activities, end-to-end support for cross-industry and industry-specific GRC processes, and automated controls that work across multiple business applications.

Procurement

We offer a broad portfolio of advanced procurement applications, including JD Edwards EnterpriseOne Supply Management, JD Edwards World Distribution Management and Supplier Self-Service, Oracle E-Business Suite Advanced Procurement, Oracle Fusion Procurement, and PeopleSoft Supplier Relationship Management, among others. These integrated procurement applications are designed to provide packaged integration to back-office applications that fully support “source-to-settle” processes for all categories of spend, including capital goods, direct materials, indirect goods and services. Our procurement applications also provide industry-specific capabilities and the flexibility to leverage applications on demand, on-premise or in any combination to achieve procurement objectives.

Supply Chain Management

We offer a broad portfolio of SCM applications, including Agile, Demantra, JD Edwards, Oracle E-Business Suite, and Oracle Fusion Applications, among others, that support supply chain management processes such as demand management, order management, supply chain planning, sales and operations planning, procurement and sourcing to product development, manufacturing, transportation and warehouse management. Our SCM software offerings are designed to provide our customers with the ability to forecast and fulfill demand for their products through end-to-end, integrated, yet modular software. For example, customers can use Demantra products to predict demand and market requirements; Agile products to manage the lifecycle of their products, innovate, and adapt them in response to volatile market conditions; Oracle Advanced Procurement products to optimize supplier and procurement networks and reduce costs; Oracle Fusion Order Orchestration to orchestrate and fulfill orders across global networks; and Oracle, PeopleSoft, and JD Edwards manufacturing applications to deploy lean, mixed-mode manufacturing with integrated manufacturing execution systems that meet both discrete and process requirements.

Enterprise Project Portfolio Management

We offer a broad portfolio of EPPM applications, including JD Edwards EnterpriseOne Project Management, Oracle E-Business Suite’s family of Oracle Projects, Oracle Fusion Project Portfolio Management, PeopleSoft Enterprise Service Automation, and Primavera Project Portfolio Management. Oracle EPPM applications target project-intensive industries such as engineering and construction, aerospace and defense, utilities, oil and gas,

manufacturing, professional services, and project-intensive departments within other industries. Our EPPM products help companies propose, prioritize and select project investments; and plan, manage and control the most complex projects and project portfolios. Additionally, our Primavera Project Portfolio Management family of products provides industry-specific solutions for project-intensive industries such as oil and gas, utilities, engineering and construction, aerospace and defense, and public sector. Through role-based user experience, embedded analytics, and collaborative tools, our EPPM solutions are designed to provide project stakeholders, project managers, and team members with the information needed to plan, mandate and deliver across the organization.

Enterprise Performance Management

Our Oracle Hyperion Performance Management suite of products are a modular set of integrated applications that integrate with both Oracle and non-Oracle transactional systems to help organizations automate, integrate and administer a broad range of financial and operational management processes. Our EPM applications include Hyperion Strategy Management; Hyperion Financial Close and Reporting; Hyperion Planning, Budgeting and Forecasting; and Hyperion Profitability and Cost Management. These applications enable organizations to define and model their financial structure, define their operating plans and manage financial budgets, allocate indirect revenues and costs to better understand business unit profitability, consolidate and aggregate financial results from a variety of systems, and manage the financial close and statutory reporting processes.

Business Intelligence / Analytic Applications

We provide packaged business intelligence applications for cross-industry business processes as well as industry-specific analytic applications. Each of our business intelligence applications features packaged data models, packaged ETL processes, packaged key performance indicators (KPIs), and packaged dashboards to deliver insight that is tailored for specific business processes. Our business intelligence applications are built on Oracle’s business intelligence technology, and source data from multiple versions of Oracle’s comprehensive portfolio of applications as well as from non-Oracle data sources. Our EPM and business intelligence applications, together with our business intelligence technology, enable us to offer our customers an integrated solution that spans planning and budgeting, financial management, operational analytics, and reporting.

Web Commerce

Our Web Commerce solutions are designed to enable enterprises to deliver a consistent, relevant and personalized cross-channel buying experience through catalog, merchandising, marketing, guided search and navigation, personalization, automated recommendations and live-help capabilities. By combining certain technologies that we have recently acquired including Art Technology Group, Inc.’s and Endeca Technologies Inc.’s Web Commerce software with our legacy Oracle and Siebel CRM software, we offer a unified cross-channel commerce and CRM platform, which is designed to enable businesses to deliver a consistent experience across a variety of different customer points of contact, including online, in-store, mobile, social and kiosk. This combined platform is designed to enable our customers to strengthen their customers’ loyalty, improve brand value, achieve better operating results, increase customer service and improve business response times across online and traditional commerce environments.

Industry-Specific Applications

Oracle Applications can be tailored to offer customers a variety of industry-specific solutions. As a part of our strategy, we strive to ensure that our applications portfolio addresses the major industry-influenced technology challenges of customers in key industries that we view as strategic to our future growth, including communications, consumer goods, education, energy, engineering and construction, financial services, healthcare, life sciences, manufacturing, professional services, public sector, retail, travel, transportation and utilities. For example, we offer the financial services sector a suite of applications addressing cash management, trade, treasury, payments, lending, private wealth management, asset management, compliance, enterprise risk and business analytics, among others. We offer the retail sector software solutions designed to provide unified and actionable data among store, merchandising and financial operations. Our applications for consumer goods

manufacturers are designed to provide them with the ability to build their brand against retail private label programs by engaging directly with the consumer. Our Public Sector solutions are designed to provide national and local governments with the ability to improve service delivery to citizens, increase internal efficiency and improve transparency. Our ability to offer applications to address industry-specific complex processes provides us an opportunity to expand our customers’ knowledge of our broader product offerings and address customer specific technology challenges.

Software License Updates and Product Support

We seek to protect and enhance our customers’ current investments in Oracle softwareapplication and platform technologies by offering proactive and personalized support services, including ourOracle Lifetime Support policy and unspecified product enhancements and upgrades. Software license updates provide customers with rights to unspecified software product upgrades and maintenance releases and patches released during the term of the support period. Product support includes internet and telephone access to technical support personnel located in our global support centers, as well as internet access to technical content through “My Oracle Support”. Software license updates and product support contracts are generally priced as a percentage of the net new software license fees. Substantially all of our customers purchase software license updates and product support contracts when they acquire new software licenses and renew their software license updates and product support contracts annually.

Cloud Infrastructure as a Service (IaaS)

Our software license updates and product support revenues represented 43%, 42% and 49%Oracle IaaS offerings, which are a part of our software and cloud business and represented 2% of total revenues in fiscal 2012, 20112015 and 2010, respectively.1% of total revenues in each of fiscal 2014 and 2013, provide deployment and management offerings for our software and hardware and related IT infrastructure, including:

Hardware Systems BusinessInfrastructure Technologies

Our hardware systems business consistsOracle infrastructure technologies consist of two operating segments:our hardware systems products and hardware systems support.

Hardwareincluding Oracle Engineered Systems, Products

We provide a complete selection of hardware systems and related services including servers, storage, networking, industry specific hardware, virtualization software, operating systems, and management software and related hardware services including support. We also offer Oracle IaaS, which provides elastic compute and storage capabilities, among others.

Our infrastructure technologies help customers manage growing amounts of data and business requirements, meet increasing compliance and regulatory demands and reduce energy, space and operational costs. Our infrastructure technologies support many of the world’s largest on-premises and cloud IT environments, including the Oracle Cloud. Our infrastructure technologies are designed to support diverse publicseamlessly connect on-premises and private cloud IT environments to further enable interoperability, interchangeability and extendibility. We design our infrastructure technologies to work in customer environments that may include other Oracle or non-Oracle hardware or software components. Our flexible and open approach provides Oracle customers with a broad range of choices in how they deploy our infrastructure technologies, which we believe is a priority for our customers.

We focus the operation and integration of our infrastructure technologies to make them easier to deploy, manage and maintain for our customers and to improve computing environments.performance relative to our competitors’ offerings. For example, our Oracle Engineered Systems are designed to integrate multiple Oracle technology components to work together to deliver improved performance, availability, security and operational efficiency relative to our competitors’ products. These same Oracle technology components are tested together and supported together to streamline system deployment and maintenance cycles. We also engineer our hardware systems with virtualization and management capabilities to enable the rapid deployment and efficient management of cloud infrastructures. Oracle’s hardware systems support many of the world’s largest public and private clouds, and power Oracle’s own internal cloud initiatives, including our software development private cloud and Oracle University’s self-service private cloud.on-premises IT infrastructures.

Our infrastructure technologies are substantially marketed, sold and delivered through our hardware products and services are designed to be “open,” or to work in customer environments that may include other Oracle or non-Oracle hardware or software components. These products and services also help to meet customers’ demands to manage growing amounts of data and business, requirements to meet increasing compliance and regulatory demands and to reduce energy, space and operational costs. We have also engineeredwhich includes our hardware systems products to create performancesegment and operational cost advantages for customers when our hardware and software products are combined as Oracle Engineered Systems.

Our Oracle Engineered Systems include Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In-Memory Machine, SPARC SuperCluster, Oracle Database Appliance and Oracle Big Data Appliance. By combining our server and storage hardware with our software, our open, integrated products better address customer and cloud computing requirements for performance, scalability, reliability, security, ease of management and lower total cost of ownership.systems support segment. Our hardware systems products revenues represented 10%, 12%8% of our total revenues in each of fiscal 2015, 2014 and 2013. Our hardware systems support revenues represented 6% of our total revenues in each of fiscal 2012, 20112015, 2014 and 2010, respectively.2013.

Oracle Engineered Systems

Oracle Engineered Systems are core to our infrastructure technology offerings and are important elements of our data center and cloud computing offerings including the Oracle Cloud. These pre-integrated products are designed to integrate multiple Oracle technology components to work together to deliver improved performance, availability, security and operational efficiency relative to our competitors’ products, to be upgraded effectively and efficiently and to simplify maintenance cycles by providing a single solution for software patching. They are tested before they are shipped to customers and delivered ready-to-run, enabling customers to shorten the time to production. Oracle’s Engineered Systems include:

Servers

We offer a wide range of server systems using our SPARC microprocessor. Our SPARC serversmicroprocessor, which are designed to be differentiated by their reliability, security and scalability;scalability. Our SPARC-based T5 mid-range server and by the customer environments that they target (general purpose or specialized systems). Our midsize and largeM6 high-end servers, for example, are designed to offer greaterbetter performance and lower total cost of ownership than mainframe systems for business critical applications and for customers having more computationally intensive needs. Measurably increasing computing performance and reliability, these servers are ideal platforms for building cloud computing IT environments. We also offer servers using microprocessors from Intel Corporation (Intel). By offering customers a range of microprocessors, we intend to offer our customers maximum flexibility in choosing the types of hardware systems that they believe will be most appropriate and valuable for their particular IT environments.

Our SPARC servers run the Oracle Solaris operating system and

are designed for the most demanding mission critical enterprise environments at any scale.environments. SPARC servers are also a core component of the SPARCOracle SuperCluster, one of our Oracle Engineered Systems.

We also offer

Our Intel-based enterprise x86 servers. These x86 servers are primarily based on microprocessor platforms from Intel Corporation (Intel) and are also compatible with Oracle Solaris, Oracle Linux, Microsoft Windows and other operating systems. Our x86 systemsservers are also a core component of many of our Oracle Engineered Systems including Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In-Memory Machine and the Oracle Big Data Appliance.

Our Netra line of products are aimed at the unique needs of original equipment manufacturers (OEMs) and network equipment providers (NEPs). 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.

Storage

Our storage products are designed to securely manage, protect, archive and restore customers’ mission critical data assets and consist of tape, disk, flash and hardware-related software including file systems software, back-up and archive software and storage management software and networking for mainframe and open systems environments. Our storage products are designed to improve data availability by providing fast data access and dynamic data protection for back-up and restoration and secure archiving for compliance. Our storage products are designed to work together, to workco-engineered with Oracle software and designed to provide performance benefits for our customers in Oracle Database and Oracle Applications environments, as well as to work with multi-vendor application and systems environments to maximize performance and efficiency while minimizing management overhead and reducinglowering the total cost of ownership.

Our SunOracle ZFS Storage Appliance is designed to improve Network Attached Storage (NAS) offering is designed to provide improved performance and manageability and reducedlower total cost of ownership by combining third-generation softwareour advanced storage operating system with high-performance controllers, DRAM and flash-based caches and disks. OurThe foundation of our Oracle Pillar AxiomFS1 flash storage system, targeted at flash Storage Area Network (SAN) system leveragesenvironments, is a patented quality-of-service architecture designed to meet business critical service level agreements underfor dynamic, multi-application loadsworkloads and enable customers to consolidate storage applications into a single data center storage solution.

Our tape storage product line includes StorageTEKOracle StorageTek libraries, drives, virtualization systems, media and device software. Theseassociated software packages that provide data lifecycle management, deep analytics and file access through the familiar “drag-and-drop” paradigm. In addition to serving in tape’s traditional role as enterprise data backup, these products are intended to provide robust, scalable solutions for both long-term preservation and near-term protection of customer data at a lower total cost of ownership.ownership for long-term data archiving and preservation in vertical industries such as communications, energy, healthcare and internet, among others.

Networking and Data Center Fabric Products

Our networking and data center fabric products, including Oracle Virtual Networking, and Oracle InfiniBand and Ethernet products, are used with our server and storage products and are integrated into our management tools to help enterprise customers improve infrastructure performance, reduce cost and complexity and simplify storage and server connectivity.

Industry Specific Hardware Offerings

We offer hardware products and services designed for specific industries. Our point-of-sale hardware offerings include point-of-sale terminals and related hardware that are designed for managing businesses within the food and beverage, hotel and retail industries, among others. Our hardware products and services for communications networks include network signaling, policy control and subscriber data management solutions, and session border control technology, among others.

Oracle Solaris and Oracle Linux Operating Systems, Virtualization and Other Hardware-Related Software

The Oracle Solaris operating system is designed to provide a reliable, secure and scalable operating system environment through significant corekernel feature development, networking, security, and file system technologies as well as close integration with hardware features. This design provides us with an ability to combine Oracle Solaris with our own hardware components to achieve certain performance and efficiency advantages in comparison to our competitors. The Oracle Solaris operating system is based on the UNIX operating system, but is unique among UNIX systems in that it is available on our SPARC servers and x86 servers that are substantially based upon microprocessors from Intel.servers. We also support Oracle Solaris deployed on other companies’ hardware products.

Oracle provides a broad virtualization solution from the desktop to the data center. Oracle Solaris 11 provides comprehensive, built-in virtualization capabilities for the operating system, network and storage resources. In addition to its built-in virtualization capabilities, Oracle Solaris 11 is engineered for server virtualization on both x86 and SPARC based systems.

The Oracle Linux operating system with Oracle’s Unbreakable Enterprise Kernel is a Linux operating system for enterprise workloads including databases, middleware and applications. Oracle’s Unbreakable Enterprise Kernel is designed to work well with Oracle products and enables users to patch core operating systems without downtime.

Oracle provides a broad portfolio of virtualization solutions from the desktop to the data center. Oracle VM is server virtualization software for both Oracle SPARC and x86 servers and supports both Oracle and non-Oracle applications. Oracle VM software is designed to enable different applications to share a single physical system for higher utilization and efficiency and simplify software deployment by enabling pre-configured software images to be created and rapidly deployed without installation or configuration errors. In addition, Oracle Solaris 11 provides comprehensive, built-in virtualization capabilities for both SPARC and x86 servers, networking and storage resources.

In addition to Oracle Solaris and Oracle Linux operating systems and Oracle’s virtualization software, we also develop a range of other hardware-related software, including development tools, compilers, management tools for servers and storage, diagnostic tools virtualization, and file systems.

Management Software

Oracle invests in a range of management technologies and products in order to meet the needs of customers building and efficiently operating complex IT environments, including both end users’ and service providers’ cloud environments. Oracle Enterprise Manager is a comprehensive management solution for all Oracle infrastructure, platform and applications technologies and provides an integrated view of the entire IT lifecycle including deployment, monitoring, and lifecycle management. Oracle Enterprise Manager can be applied to traditional on-premises, cloud, and hybrid cloud environments in a seamless manner via a single interface, which accelerates customer deployment of and transition to the cloud with Oracle products. Oracle also enhances and integrates with certain key open technologies including OpenStack, which is broadly supported by Oracle products for customers that require seamless integration with this method of cloud management and provisioning. The combination of Oracle’s comprehensive solutions and investments in open standards allows Oracle customers to manage Oracle products efficiently across a range of IT offerings from traditional on-premises environments to the most advanced cloud architectures.

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 storagehardware products, such as Oracle Solaris and certain other software products, and can include product repairs, maintenance services and technical support services. We continue to evolve hardware systems support processes that are intended to proactively identify and solve quality issues and to increase the amount of new and renewed hardware systems support contracts sold in connection with the sales of our hardware systems products. Hardware systems support contracts are generally priced as a percentage of the net hardware systems products fees. Our hardware systems support revenues represented 7% of our total revenues in each of fiscal 2012 and 2011 and 3% in fiscal 2010.

Services Business

We deliver an integratedoffer services solutionsolutions to help customers and partners maximize the performance of their investments in Oracle technology. Ourapplication, platform and infrastructure technologies. We believe our services are differentiated based on our focus on Oracle technology,technologies, extensive experience and broad setsets of intellectual property and best practices. Our services business represented 9%, 10% and 11% of our total revenues in fiscal 2015, 2014 and 2013, respectively. Our services business, which is comprised of the remainder of our operating segments, and offers the following:

Managed Cloud Services

Marketing and Sales

We directly market and sell our products and services to businesses of many sizes and in many industries, government agencies and educational institutions. We also market and sell our products through indirect channels. No single customer accounted for 10% or more of our total revenues in fiscal 2012, 20112015, 2014 or 2010.2013.

In the United States, our sales and serviceservices employees are based in our headquarters and in field offices throughout the country. Outside the United States, our international subsidiaries sell, support and supportservice our products and offerings in their local countries as well as within other foreign countries where we do not operate through a direct sales subsidiary. Our geographic coverage allows us to draw on business and technical expertise from a global workforce, provides stability to our operations and revenue streams to offset geography-specificgeography specific economic trends and offers us an opportunity to take advantage of new markets for our products. Our international operations subject us to certain risks, which are more fully described in “Risk Factors” included in Item 1A.1A of this Annual Report. A summary of our domestic and international revenues and long-lived assets is set forth in Note 16 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

We also market our products worldwide through indirect channels. The companies that comprise our indirect channel network are members of the Oracle Partner Network. The Oracle Partner Network is a global program that manages our business relationships with a large, broad-based network of companies, including independent software and hardware vendors, system integrators and resellers that deliver innovative solutions and services based upon our products.product offerings. By offering our partners access to our premier products,product offerings, educational information, technical services, marketing and sales support, the Oracle Partner Network program extends our market reach by providing our partners with the resources they need to be successful in delivering solutions to customers globally. The majority of our hardware systems products are sold through indirect channels including independent distributors and value added resellers.

Seasonality and Cyclicality

Our quarterly revenues have historically been affected by a variety of seasonal factors, including the structure of our sales force incentive compensation plans, which are common in the technology industry. Our total revenues and operating margins are typically highest in our fourth fiscal quarter and lowest in our first fiscal quarter. The operating margins of our businesses are generally affected by seasonal factors in a similar manner as our revenues (in particular, our new software licenses and cloud software subscriptions segment) as certain expenses within our cost structure are relatively fixed in the short term. See “Selected Quarterly Financial Data” in Item 7 of this Annual Report for a more complete description of the seasonality and cyclicality of our revenues, expenses and margins.

Competition

We face intense competition in all aspects of our business. The nature of the IT industry creates a competitive landscape that is constantly evolving as firms emerge, expand or are acquired, as technology evolves and as customer demands and competitive pressures otherwise change.

Our customers are demanding less complexity and lower total cost in the implementation, sourcing, integration and ongoing maintenance of their enterprise software and hardware systems. Our enterprise software and cloud and hardware offerings compete directly with some offerings from some of the largest and most competitive companies in the world, including Microsoft Corporation (Microsoft), International Business Machines Corporation (IBM), Intel, Hewlett-Packard Company (HP) and SAP AG and smaller companies like Salesforce.com,

salesforce.com, inc. and Workday, Inc., as well as many others. In addition, due to the low barriers to entry in many of our market segments, regularly introduce new technologies and new and growing competitors frequently emerge to challenge our offerings. Our competitors range from companies offering broad IT solutions across many of our lines of business to vendors providing point solutions, or offerings focused on a specific functionality, product area or industry. In addition, as we expand into new market segments, we will face increased competition as we will compete with existing competitors, as well as firms that may be partners in other areas of our business and other firms with whom we have not previously competed.competed like Amazon.com, Inc. Moreover, we or our competitors may take certain strategic actions—including acquisitions, partnerships and joint ventures, or repositioning of product lines—which invite even greater competition in one or more product categories.

Key competitive factors in each of the segments in which we currently compete and may compete in the future include: total cost of ownership, performance, scalability, reliability, security, functionality, efficiency, ease of management and quality of technical support. Our product and service sales (and the relative strength of our products and services versus those of our competitors) are also directly and indirectly affected by the following, among other things:

For more information about the competitive risks we face, refer to Item 1A. “Risk Factors.”Factors” included elsewhere in this Annual Report.

Manufacturing

To produce our hardware systems products, we rely on both our internal manufacturing operations as well as third party manufacturing partners. Our internal manufacturing operations consist primarily of finalmaterials procurement, assembly, testtesting and quality control of our Oracle Engineered Systems and certain of our enterprise and data center servers, storage systems and storage systems.networking products. For substantially all other manufacturing, we generally rely on third party manufacturing partners.partners to produce our hardware related components and hardware products and we may involve our internal manufacturing operations in the final assembly, testing and quality control processes for these components and products. We distribute most of our hardware systems products either from our facilities or partner facilities. Our manufacturing processes substantially are based on standardization of components across product types, centralization of assembly and distribution centers and a “build-to-order” methodology in which products generally are built only after customers have placed firm orders. Production of our hardware products requires that we purchase materials, supplies, product subassemblies and full assemblies from a number of vendors. For most of our hardware products, we have existing alternate sources of supply or such sources are readily available.

However, we do rely on sole sources for certain of our hardware products. As a result, we continue to evaluate potential risks of disruption to our supply chain operations. Refer to “Risk Factors” included in Item 1A.1A within this Annual Report for additional discussion of the challenges we encounter with respect to the sources and availability of supplies for our products and the related risks to our business.

Research and Development

We develop the substantial majority of our products internally. In addition, we have extended our product offerings and intellectual property through acquisitions of businesses and technologies. We also purchase or license intellectual property rights in certain circumstances. Internal development allows us to maintain technical control over the design and development of our products. We have a number of United States and foreign patents and pending applications that relate to various aspects of our products and technology. While we believe that our patents have value, no single patent is essential to us or to any of our principal business segments. Research and development expenditures were $4.5$5.5 billion, in each of fiscal 2012$5.2 billion and 2011 and $3.3$4.9 billion in fiscal 2010,2015, 2014 and 2013, respectively, or 12%, 13% and 12%14% of total revenues in fiscal 2012, 20112015 and 2010, respectively.13% of total revenues in each of fiscal 2014 and 2013. Rapid technological advances in hardware and software development, evolving standards in computer hardware and software technology, changing customer needs and frequent new product introductions and enhancements characterize the software and cloud and hardware markets in which we compete. We plan to continue to dedicate a significant amount of resources to research and development efforts to maintain and improve our current product and services offerings.

Employees

As of May 31, 2012,2015, we employed approximately 115,000132,000 full-time employees, including approximately 30,00035,000 in sales and marketing, approximately 9,00011,000 in software license updates and product support, approximately 6,000 in our cloud SaaS, PaaS and IaaS operations, approximately 1,000 in the manufacturing of our hardware systems products, approximately 6,0005,000 in hardware systems support, approximately 26,00023,000 in services, approximately 32,00038,000 in research and development and approximately 11,00013,000 in general and administrative positions. Of these employees, approximately 42,00049,000 were locatedemployed in the United States and approximately 73,00083,000 were employed internationally. None of our employees in the United States is represented by a labor union; however, in certain foreign subsidiaries labor unions or workers’ councils represent some of our employees.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations web sitewebsite at www.oracle.com/investor as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.United States Securities and Exchange Commission (SEC). The information posted on or accessible through our web sitewebsite is not incorporated into this Annual Report.

Executive Officers of the Registrant

Our executive officers are listed below.

Mr. Ellison, 67,Ms. Catz, 53, has been our Chief Executive Officer and a Director since he founded Oracle in June 1977. HeSeptember 2014. She served as Chairman of the Boardour President from May 1995 to January 2004.

Mr. Henley, 67, has served as Chairman of the Board since January 2004 and as a Director since June 1995. He served as Executive Vice President and Chief Financial Officer from March 1991 to July 2004.

Ms. Catz, 50, has been a President since January 2004,September 2014, our Chief Financial Officer most recently sincefrom April 2011 until September 2014 and has served as a Director since October 2001. She was previously our Chief Financial Officer from November 2005 until September 2008 and our Interim Chief Financial Officer from April 2005 until July 2005. Prior to being named our President, she held various other positions with us since joining Oracle in 1999. She also currently serves as a director of HSBC Holdings plc.

Mr. Hurd, 55,58, has been aour Chief Executive Officer since September 2014. He served as our President from September 2010 to September 2014 and served as a Director since September 2010. Prior to joining us, he served as Chairman of the Board of Directors of HP from September 2006 to August 2010 and as Chief Executive Officer, President and a member of the Board of Directors of HP from April 2005 to August 2010.

Mr. Fowler, 51,Ellison, 70, has been our Chairman of the Board and Chief Technology Officer since September 2014. He served as our Chief Executive Officer from June 1977, when he founded Oracle, until September 2014. He has served as a Director since June 1977. He previously served as our Chairman of the Board from May 1995 to January 2004.

Mr. Henley, 70, has served as our Vice Chairman of the Board since September 2014. He previously served as our Chairman of the Board from January 2004 to September 2014 and has served as a Director since June 1995. He served as our Executive Vice President Systems since February 2010. Prior to joining us, Mr. Fowler served as Sun Microsystems, Inc.’s Executive Vice President, Systems Groupand Chief Financial Officer from May 2006 to February 2010, as Executive Vice President, Network Systems Group from May 2004 to May 2006, as Chief Technology Officer, Software Group from July 2002 to May 2004 and Director, Corporate Development from July 2000March 1991 to July 2002.2004.

Mr. Kurian, 45,48, has been our President, Product Development since January 2015. He served as our Executive Vice President, Product Development sincefrom July 2009.2009 until January 2015. He served as our Senior Vice President of Development from February 2001 until July 2009. Mr. Kurian worked in Oracle Server Technologies as Vice President of Development from March 1999 until February 2001. He also held various other positions with us since joining Oracle in 1996.

Mr. Fowler, 54, has been Executive Vice President, Systems since February 2010. Prior to Oracle’s acquisition of Sun Microsystems, Inc., Mr. Fowler served as Sun’s Executive Vice President, Systems Group from May 2006 to February 2010, as Executive Vice President, Network Systems Group from May 2004 to May 2006 and as Chief Technology Officer, Software Group from July 2002 to May 2004.

Ms. Daley, 53,56, has been our Executive Vice President, General Counsel and Secretary since April 2015 and was our Senior Vice President, General Counsel and Secretary sincefrom October 2007.2007 to April 2015. She served as our Vice President, Legal, Associate General Counsel and Assistant Secretary from June 2004 to October 2007, as Associate General Counsel and Assistant Secretary from October 2001 to June 2004 and as Associate General Counsel from February 2001 to October 2001. She held various other positions with us since joining Oracle’s Legal Department in 1992.

Mr. West, 50,53, has been our Executive Vice President, Corporate Controller and Chief Accounting Officer since April 2015. He served as our Senior Vice President, Corporate Controller and Chief Accounting Officer sincefrom February 2008 to April 2015 and wasserved as our Vice President, Corporate Controller and Chief Accounting Officer from April 2007 to February 2008. His previous experience includes 14 years with Arthur Andersen LLP, most recently as a partner.

Item 1A.    Risk Factors

We operate in rapidly changing economic and technological environments that present numerous risks, many of which are driven by factors that we cannot control or predict. The following discussion, as well as our “Critical Accounting Policies and Estimates” discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7), highlights some of these risks. The risks described below are not exhaustive and you should carefully consider these risks and uncertainties before investing in our securities.

Economic, political and market conditions 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.    Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting. These include:

Macroeconomic developments like the debt crisiscontinued slow pace of economic recovery in certain countries inEurope and parts of the European Union and slowing economies in parts ofUnited States, Asia and South America could negatively affect our business, operating results, or financial condition and outlook, which, in turn, could adversely affect our stock price. AAny general weakening of, and related declining corporate confidence in, the global economy or the curtailment inof government or corporate spending could cause current or potential customers to reduce or eliminate their information technology (IT) budgets or be unable to fund software, hardware systems or services purchases,and spending, which could cause customers to delay, decrease or cancel purchases of our products and services or cause customers not to pay us or to delay paying us for previously purchased products and services.

In addition, political unrest in regionsplaces like Ukraine, Syria and Iraq and the Middle East,related potential impact on global stability, terrorist attacks around the globe and the potential for other hostilities in various parts of the world, potential public health crises and natural disasters continue to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and financial condition, including our revenue growth and profitability. These factors generally have the strongest effect on our sales of new software licenses, hardware systems products, hardware systems support and related services and, to a lesser extent, also may affect our renewal rates for software license updates and product support.support and our subscription-based cloud offerings.

We may experience foreign currency gains and losses. Changes in currency exchange rates can adversely affect customer demand and our revenue and profitability.    We conduct a significant number of transactions and hold cash in currencies other than the U.S. Dollar. Changes in the values of major foreign currencies, particularly the Euro, Japanese Yen and British Pound, relative to the U.S. Dollar can significantly affect our total assets, revenues, operating results and cash flows, which are reported in U.S. Dollars. In particular, the economic uncertainties relating to European sovereign and other debt obligations may cause the value of the Euro to fluctuate relative to the U.S. Dollar. Fluctuations in foreign currency rates, most notably the recent strengthening of the U.S. Dollar against the Euro, adversely affects our revenue growth in terms of the amounts that we report in U.S. Dollars after converting our Euro-based results into U.S. Dollars and in terms of actual demand for our products and services as these products become relatively more expensive for Euro-based enterprises to purchase. In addition, currency variations can adversely affect margins on sales of our products in countries outside of the United States. Generally, our revenues and operating results are adversely affected when the dollar strengthens relative to other currencies and are positively affected when the dollar weakens. In addition, our reported assets generally are adversely affected when the dollar strengthens relative to other currencies as a significant portion of our consolidated cash and bank deposits, among other assets, are held in foreign currencies. The U.S. dollar strengthened relative to other currencies, including the Euro, in fiscal 2015, which is reflected in our results.

Certain of our international subsidiaries operate in economies that have been designated as highly inflationary. We have incurred foreign currency losses associated with the devaluation of currencies in these highly inflationary economies relative to the U.S. Dollar and we may continue to incur such losses in these countries or other emerging market countries where we do business.

In addition, we incur foreign currency transaction gains and losses, primarily related to sublicense fees and other intercompany agreements among us and our subsidiaries that we expect to cash settle in the near term, which are charged against earnings in the period incurred. We have a program which primarily utilizes foreign currency forward contracts designed to offset the risks associated with certain foreign currency exposures. We may suspend the program from time to time. As a part of this program, we enter into foreign currency forward contracts so that increases or decreases in our foreign currency exposures are offset at least in part by gains or losses on the foreign currency forward contracts in an effort to mitigate the risks and volatility associated with our foreign currency transaction gains or losses. A large portion of our consolidated operations are international, and we expect that we will continue to realize gains or losses with respect to our foreign currency exposures, net of gains or losses from our foreign currency forward contracts. For example, we will experience foreign currency gains and losses in certain instances if it is not possible or cost effective to hedge our foreign currency exposures, if our hedging efforts are ineffective, or should we suspend our foreign currency forward contract program. Our ultimate realized loss or gain with respect to currency fluctuations will generally depend on the size and type of cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, whether we have entered into foreign currency forward contracts to offset these exposures and other factors. All of these factors could materially impact our results of operations, financial position and cash flows.

We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other factors.    Our revenues, and particularly our new software licenselicenses revenues and hardware systems products revenues, are difficult to forecast, and, asforecast. As a result, our quarterly operating results can fluctuate substantially. Our limited experience with managing our hardware business and forecasting its future financial results creates additional challenges with our forecasting processes.

We use a “pipeline” system, a common industry practice, to forecast sales and trends in our business. Our sales personnel monitor the status of all proposals and estimate when a customer will make a purchase decision and the dollar amount of the sale. These estimates are aggregated periodically to generate a sales pipeline. Our pipeline estimates can prove to be unreliable both in a particular quarter and over a longer period of time, in part because the “conversion rate” or “closure rate” of the pipeline into contracts can be very difficult to estimate. A contractionreduction in the conversion rate, or in the pipeline itself, could cause us to plan or budget incorrectly and adversely affect our business or results of operations. In particular, a slowdown in IT spending or economic conditions generally can unexpectedly reduce the conversion rate in particular periods as purchasing decisions are delayed, reduced in amount or cancelled. The conversion rate can also be affected by the tendency of some of our customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms, which can also impede our ability to negotiate, execute and deliver upon these contracts in a timely manner. In addition, for

newly acquired companies, we have limited ability to predict how their pipelines will convert into sales or revenues for a number of quarters following the acquisition. Conversion rates post-acquisition may be quite different from the acquired companies’ historical conversion rates. Differences in conversion rates can also be affected by changes in our business practices that we implement within our newly acquired companies thatcompanies. These changes may negatively affect customer behavior.

A substantial portion of our new software license revenue contractslicenses and hardware systems products contracts is completed in the latter part of a quarter and a significant percentage of these are largelarger orders. Because a significant portion of our cost structure is largely fixed in the short-term, sales and revenue shortfalls tend to have a disproportionately negative impact on our profitability. The number of large new software licenselicenses transactions and, to a lesser extent, hardware systems products transactions also increases the risk of fluctuations in our quarterly results because a delay in even a small number of these transactions could cause our quarterly sales, revenues and profitability to fall significantly short of our predictions.

Our Oracle Cloud strategy, including our Oracle Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Data as a Service (DaaS) offerings, may adversely affect our revenues and profitability.    We offer customers a full range of consumption models including the deployment of our products via our cloud based SaaS, PaaS, IaaS and DaaS offerings. These business models continue to evolve, and we may not be able to compete effectively, generate significant revenues or maintain the profitability of our cloud offerings. Additionally, the increasing prevalence of cloud and SaaS delivery models offered by us and our competitors may unfavorably impact the pricing of our on-premises enterprise software offerings and our cloud offerings, and has a dampening impact on overall demand for our on-premises software product and service

offerings, which could reduce our revenues and profitability, at least in the near-term. If we do not successfully execute our cloud computing strategy or anticipate the cloud computing needs of our customers, our reputation as a cloud services provider could be harmed and our revenues and profitability could decline.

Our cloud offerings are generally purchased by customers on a subscription basis and revenues from these offerings are generally recognized ratably over the term of the subscriptions. The deferred revenue that results from sales of our cloud offerings may prevent any deterioration in sales activity associated with our cloud offerings from becoming immediately observable in our consolidated statement of operations. This is in contrast to revenues associated with our new software licenses arrangements whereby new software licenses revenues are generally recognized in full at the time of delivery of the related software licenses. We incur certain expenses associated with the infrastructures and marketing of our cloud offerings in advance of our ability to recognize the revenues associated with these offerings. As customer demand for our cloud offerings increases, we experience volatility in our reported revenues and operating results due to the differences in timing of revenue recognition between our new software licenses arrangements and cloud offering arrangements.

We have also acquired a number of cloud computing companies, and the integration of these companies into our Oracle Cloud strategy may not be as efficient or scalable as anticipated, which could adversely affect our ability to fully realize the benefits anticipated from these acquisitions.

Our success depends upon our ability to develop new products and services, integrate acquired products and services and enhance our existing products and services.    Rapid technological advances and evolving standards in computer hardware and software development and communications infrastructure, changing and increasingly sophisticated customer needs and frequent new product introductions and enhancements characterize the enterprise software and hardware systems marketsindustries in which we compete. If we are unable to develop new or sufficiently differentiated products and services, or enhance and improve our products and support services in a timely manner or to position and/orand price our products and services to meet demand, customers may not buy newpurchase or subscribe to our software, licenseshardware or hardware systems products or purchasecloud offerings or renew software license updates and productsupport, hardware support or hardware systems supportcloud subscriptions contracts. Renewals of these support contracts are important to the growth of our business. In addition, IT standards from both consortia and formal standards-setting forums as well as de facto marketplace standards are rapidly evolving. Wewe cannot provide any assurance that the standards on which we choose to develop new products will allow us to compete effectively for business opportunities in emerging areas.

We have released Oracle Fusion Applications, the next generationcontinued to refresh and release new offerings of our applications software offerings, which are designed to unify the best-of-business functional capabilities from all ofand cloud and hardware products and services, including our applications on an open-standards-based technology foundation accessible by customers through the cloud or on-premise. We have also recently designedDatabase Multitenant, Database In-Memory, SaaS, PaaS, IaaS, DaaS and built our Oracle Engineered Systems product offerings including Oracle Exadata Database Machine, a fast database warehousing machine that runs online transaction processing applications; Oracle Exalogic Elastic Cloud, an integrated “cloud” machine which has server hardware and middleware software that have been engineered together; Oracle Exalytics In-Memory Machine, an engineered system featuring in-memory software and hardware and an optimizedofferings. Our business intelligence platform; and SPARC SuperCluster, an engineered system which combines optimized database performance with accelerated middleware processing capabilities; among others. If may be adversely affected if:

If our security measures for our software, hardware, services or Oracle Cloud offerings are compromised and as a result, our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged, the IT services we provide to our customers could be disrupted, and customers may stop using our products and services, all of which could reduce our revenue and earnings, increase our expenses and expose us to legal claims and regulatory actions.    We are in the information technology business, and our products and services, including our Oracle Cloud offerings, store, retrieve, manipulate and manage our customers’ information and data, external data, as well as our own data. We have a reputation for secure and reliable product offerings and related services and we have invested a great deal of time and resources in protecting the integrity and security of our products, services and the internal and external data that we manage.

At times, we encounter attempts by third parties to identify and exploit product and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’, partners’ and suppliers’ software, hardware and cloud offerings, networks and systems, any of which could lead to the compromise of personal information or the confidential information or data of Oracle or our customers. Computer hackers and others may be able to develop and deploy IT related viruses, worms, and other malicious software programs that could attack our products and services, exploit potential security vulnerabilities of our products and services, create system disruptions and cause shutdowns or denials of service. This is also true for third party data, products or services incorporated into our own. Data may also be accessed or modified improperly as a result of customer, partner, employee or supplier error or malfeasance and third parties may attempt to fraudulently induce customers, partners, employees or suppliers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data, our customers’, suppliers’ or partners’ data or the IT systems of Oracle, its customers, suppliers or partners.

High-profile security breaches at other companies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting information technology products and businesses. Although this is an industry-wide problem that affects other software and hardware companies, it affects Oracle in particular because computer hackers tend to focus their efforts on the most prominent IT companies, and they may focus on Oracle because of our reputation for, and marketing efforts associated with, having secure products and services. These risks will increase as we continue to grow our cloud offerings and store and process increasingly large amounts of data, including personal information and our customers’ confidential information and data and other external data, and host or manage parts of our customers’ businesses in cloud-based IT environments, especially in customer sectors involving particularly sensitive data such as health sciences, financial services and the government. We also have an active acquisition program and have acquired a number of companies, products, services and technologies over the years. While we make significant efforts to address any IT security issues with respect to our acquired companies, we may still inherit such risks when we integrate these companies within Oracle.

If a cyber-attack or other security incident described above were to allow unauthorized access to or modification of our customers’ or suppliers’ data, other external data or our own data or our IT systems or if the services we provide to our customers were disrupted, or if our products or services are perceived as having security vulnerabilities, we could suffer significant damage to our brand and reputation. Customers could lose confidence in the security and reliability of our products and services, including our cloud offerings, and perceive them to be not secure. This in turn could lead to fewer customers using our products and services and result in reduced revenue and earnings. The costs we would incur to address and fix these security incidents would increase our expenses. These types of security incidents could also lead to lawsuits, regulatory investigations and claims and increased legal liability, including in some cases contractual costs related to customer notification and fraud monitoring.

Our business practices with respect to the collection, use and management of personal information could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.    As regulatory focus on privacy issues continues to increase and worldwide laws and regulations concerning the handling of personal information expand and become more complex, potential risks related to data collection and use within our business will intensify. U.S. and foreign governments have enacted or are considering enacting legislation or regulations, or may in the near future interpret existing legislation or regulations, in a manner that could significantly impact the ability of Oracle and our customers and data partners to collect, augment, analyze, use, transfer and share personal and other information that is integral to certain services Oracle provides and data services. This could be true particularly in those jurisdictions where privacy laws or regulators take a broader view of how personal information is defined, therefore subjecting the handling of such data to heightened restrictions that may be obstructive to the operations of Oracle and its customers and data providers. This impact may be acute in countries that have passed or are considering passing legislation that requires data to remain localized “in country”, as this imposes financial costs on any service provider that is required to store data in jurisdictions not of its choosing and nonstandard operational processes that are difficult and costly to integrate with global processes. Regulators globally are also imposing greater monetary fines for privacy violations, and the European

Union (EU) is considering legislation that would impose fines for privacy violations based on a percentage of global revenues. Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information, could greatly increase our cost of providing our products and services or even prevent us from offering certain of our services in jurisdictions that we operate. Additionally, public perception and standards related to the privacy of personal information can shift rapidly, in ways that may affect Oracle’s reputation or influence regulators to enact regulations and laws that may limit Oracle’s ability to provide certain products. Any failure, or perceived failure, by Oracle to comply with U.S. federal, state, or foreign laws and regulations, including laws and regulations regulating privacy, data security, or consumer protection, or other policies, public perception, standards, self-regulatory requirements or legal obligations, could result in lost or restricted business, proceedings, actions or fines brought against us or levied by governmental entities or others, or could adversely affected.affect our business and harm our reputation.

We might experience significant coding, manufacturing or configuration errors in our software, hardware and cloud offerings.    Despite testing prior to their release and throughout the lifecycle of a product or service, software, hardware and cloud offerings sometimes contain coding or manufacturing errors that can impact their function, performance and security, and result in other negative consequences. The detection and correction of any errors in released software, hardware or cloud offerings can be time consuming and costly. Errors in our software, hardware or cloud offerings could affect their ability to properly function or operate with other software, hardware or cloud offerings, could delay the development or release of new products or services or new versions of products or services, could result in creating security vulnerabilities in our products or services, and could adversely affect market acceptance of our products or services. This includes third party software products or services incorporated into our own. If we experience errors or delays in releasing our software, hardware or cloud offerings or new versions thereof, our sales could be affected and revenues could decline. In addition, we run Oracle’s business operations as well as cloud and other services that we offer to our customers on our products and networks. Therefore, any flaws could affect our ability to conduct our business operations and the operations of our customers. Enterprise customers rely on our software and hardware products and services to run their businesses and errors in our software, hardware or cloud offerings could expose us to product liability, performance and warranty claims as well as significant harm to our brand and reputation, which could impact our future sales.

If we are unable to compete effectively, with existing or new hardware systems or software competitors, the results of operations and prospects for our business could be harmed through fewer customer orders, reduced pricing, lower revenuesharmed.    We face intense competition in all aspects of our business. The nature of the IT industry creates a competitive landscape that is constantly evolving as firms emerge, expand or lower profits.    are acquired, and as technology evolves. Many vendors develop and market databases, middleware products, application development tools, business applications, collaboration products and business intelligence products, among others, that compete with our software and cloud offerings. These vendors include on-premises software companies and companies that offer cloud based SaaS, PaaS, IaaS and DaaS offerings and business process outsourcing (BPO) as competitive alternatives to buying software and hardware. Our competitors that offer business applications and middleware products may influence a customer’s purchasing decision for the underlying database in an effort to persuade potential customers not to acquire our products. We could lose customers if our competitors introduce new competitive products, add new functionality, acquire competitive products, reduce prices or form strategic alliances with other companies. We may also face increasing competition from open source software initiatives in which competitors may provide software and intellectual property for free. Existing or new competitors could gain sales opportunities or customers at our expense.

Our hardware systems business will competecompetes with, among others, (i) systems manufacturers and resellers of systems based on our own microprocessors and operating systems and those of our competitors, (ii) microprocessor/chip manufacturers, and (iii) providers of storage products.products and (iv) certain industry-specific hardware manufacturers including those serving communications, hospitality and retail industries. Our hardware systems business may also causecauses us to compete with certain companies whothat historically have been our partners. TheseSome of these competitors may have more experience than we do in managing a hardware business. A large portion of our hardware products are based on our SPARC microprocessor and Oracle Solaris operating system platform, which has a smaller installed base than certain of our competitors’ platforms and which may make it difficult for us to win new customers that have already made significant investments in our competitors’

platforms. Certain of these competitors also

compete very aggressively on price. A loss in our competitive position could result in lower revenues or profitability, which could adversely impact our ability to realize the revenue and profitability forecasts for our hardware systems business.

Many vendors developOur international sales and market databases, middleware products, application development tools, business applications, collaboration productsoperations subject us to additional risks that can adversely affect our operating results.    We derive a substantial portion of our revenues from, and business intelligence products, amongst others, that compete with our software offerings. In addition, several companies offer software-as-a-service (SaaS) or cloud computing and business process outsourcing (BPO) as competitive alternatives to buyinghave significant operations, outside of the United States. Our international operations include software and hardware systems development, manufacturing, assembly, sales, customer support, consulting and customer interestother services and shared administrative service centers.

Compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in cloud or SaaS solutions is increasing. Someforeign jurisdictions. These laws and regulations include U.S. laws and local laws which include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, prohibitions on payments to governmental officials, import and trade restrictions and export requirements. Violations of these competitors have greater financiallaws and regulations could result in fines, criminal sanctions against us, our officers or technicalour employees, and prohibitions on the conduct of our business. Any such violations could result in prohibitions on our ability to offer our products and services in one or more countries, could delay or prevent potential acquisitions and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. Compliance with these laws requires a significant amount of management attention and effort, which may divert management’s attention from running our business operations and could harm our ability to grow our business, or may increase our expenses as we engage specialized or other additional resources than we do.to assist us with our compliance efforts. Our competitors that offer business applicationssuccess depends, in part, on our ability to anticipate these risks and middleware products may influence a customer’s purchasing decision formanage these difficulties. We monitor our operations and investigate allegations of improprieties relating to transactions and the underlying database in an effort to persuade potential customers not to acquire our products. We could lose customers if our competitors introduce new competitive products, add new functionality, acquire competitive products, reduce prices or form strategic alliances with other companies. Vendors that offer SaaS, cloud or BPO solutions may persuade our customers not to purchase our products. We may also face increasing competition from open source software initiativesway in which competitors maysuch transactions are recorded. Where circumstances warrant, we provide softwareinformation and intellectual property for free. Existingreport our findings to government authorities, but no assurance can be given that action will not be taken by such authorities.

We are also subject to a variety of other risks and challenges in managing an organization operating in various countries, including those related to:

The variety of risks and challenges listed above could also disrupt or otherwise negatively impact the supply chain operations for our hardware systems products generally are not built until after customers place orders, may from time to time experience delays in deliveringsegment and the sales of our hardware systems products to customers in a timely manner. These delays could cause our customers to purchase hardware products and services from our competitors. We must also manage new hardware product introductionsin affected countries or regions.

As the majority shareholder of Oracle Financial Services Software Limited (OFSS), a publicly traded company in India, and transitionsOracle Corporation Japan (NOKK), a publicly traded company in Japan, we are faced with several additional risks, including being subject to minimize the impact of customer delayed purchases of existing hardware systems products in anticipation of new hardware systems product releases. Because the designlocal securities regulations and manufacturing processes for components are also very complicated, it is possiblebeing unable to exert full control that we could experience designwould otherwise have if OFSS or manufacturing flaws. These design or manufacturing flaws could delay or prevent the production of the components for which we have previously committed to pay or need to fulfill orders from customers. These types of component flaws could also prevent the production of our hardware products or cause our hardware products to be returned, recalled or rejected resulting in lost revenues, increases in warranty costs or costs related to remediation efforts, damage to our reputation, penalties and litigation.NOKK were wholly owned subsidiaries.

Acquisitions present many risks and we may not realize the financial and strategic goals that were contemplated at the time of a transaction.    In recent years, we have invested billions of dollars to acquire a number of companies, products, services and technologies. AnA selective and active acquisition program is an important element of our overall corporate strategy and we expect to continue to make acquisitions in the future. Risks we may face in connection with our acquisition program include:

The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions.

Our periodic workforce restructurings, including reorganizations of our sales force, can be disruptive.    We have in the past restructured or made other adjustments to our workforce, including our direct sales force on which we rely heavily, in response to management changes, product changes, performance issues, acquisitions and other internal and external considerations. In the past, these types of sales force restructurings have resulted in increased restructuring costs, increased sales and marketing costs and temporary reduced productivity while the sales teams adjusted to their new roles and responsibilities. In addition, we may not achieve or sustain the expected growth or cost savings benefits of these restructurings, or do so within the expected timeframe. These effects could recur in connection with future acquisitions and other restructurings and our revenues and other results of operations could be negatively affected.

Our hardware systems revenues and profitability could decline if we do not manage the risks associated with our hardware systems business.    Our hardware systems business may adversely affect our overall profitability if we do not effectively manage the associated risks. We may not achieve our estimated revenue, profit or other financial projections with respect to our hardware systems business in a timely manner or at all due to a number of factors, including:

practices and go-to-market strategies that we may alter as a part of our integration efforts, which may significantly impact our estimated revenues and profits from the acquired company; (iii) leverage different platforms or competing technologies that we may encounter difficulties in integrating; or (iv) utilize unique manufacturing processes that affect our ability to scale these acquired products within our own manufacturing operations.

Our strategy of transitioning to a mixed direct and indirect sales model for our hardware systems products may not succeed and could result in lower hardware revenues or profits. Disruptions to our software indirect sales channel could affect our future operating results.    Although we will continue to sell our hardware systems products through indirect channels, including independent distributors and value added resellers, we have enhanced our direct sales coverage for our hardwareofferings are complex products, and intend that our direct sales force will sell a larger portion of our hardware products in the future than they do now. These direct sales efforts, however, may not be successful. Our relationships with some of our channel partners may deteriorate because we are reducing our reliance on some of these partners for sales of our hardware products, are modifying our approach and timing to the manufacturing of our products and have altered certain of Sun’s legacy business practices with these channel partners, which could result in reduced demand from the channel partners or certain customer segments serviced by these channel partners. Some hardware revenues from channel partners may not be replaced by revenues generated from our own sales personnel or may not be replaced as quickly as we expect. In addition, we may not be able to hire qualified hardware salespeople, sales consultants and other personnel for our direct sales model at the rate or in the numbers we need to generate the hardware revenues and profit margins we have projected for future periods. Even if we can meet our hiring needs, these salespeople may not be able to achieve our sales forecasts for our hardware business. If we experience any of these risks, our hardware revenues and/or profits may decline.

Our software indirect channel network is comprised primarily of resellers, system integrators/implementers, consultants, education providers, internet service providers, network integrators and independent software vendors. Our relationships with these channel participants are important elements of our software marketing and sales efforts. Our financial results could be adversely affected if our contracts with channel participants were terminated, if our relationships with channel participants were to deteriorate, if any of our competitors enter into

strategic relationships with or acquire a significant channel participant or ifcannot successfully manage this complexity, the financial condition of our channel participants were to weaken. There can be no assurance that we will be successful in maintaining, expanding or developing our relationships with channel participants. If we are not successful, we may lose sales opportunities, customers and revenues.

Our international sales and operations subject us to additional risks that can adversely affect our operating results.    We derive a substantial portion of our revenues from, and have significant operations, outside of the United States. Our international operations include software and hardware systems development, manufacturing, assembly, sales, customer support, consulting, managed cloud services and shared administrative service centers.

Compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. These laws and regulations include U.S. laws and local laws which include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, prohibitions on payments to governmental officials, import and trade restrictions and export requirements. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could result in prohibitions on our ability to offer our products and services in one or more countries, could delay or prevent potential acquisitions and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties. We monitor our international operations and investigate allegations of improprieties relating to transactions and the way in which such transactions are recorded. Where circumstances warrant, we provide information and report our findings to government authorities, but no assurance can be given that action will not be taken by such authorities.

We are also subject to a variety of other risks and challenges in managing an organization operating in various countries, including those related to:

As a result of our hardware systems business, the volume and complexity of laws and regulations that we are subject to have increased. The variety of risks and challenges listed above could also disrupt or otherwise negatively impact the supply chain operations for our hardware systems products segment and the sales of our products and services in affected countries or regions.

As the majority shareholder of Oracle Financial Services Software Limited, a publicly traded Indian software company focused on the banking industry, we are faced with several additional risks, including being subject to local securities regulations and being unable to exert full control.

The future operating results of our hardware systems business will depend onsuffer.    Designing, developing, manufacturing and introducing new hardware systems products are complicated processes. The development process for our abilityhardware systems products is uncertain and requires a high level of innovation. After the development phase, we must be able to manage our component inventoryforecast customer demand and manufacture new hardware systems products in sufficient volumes to meet this demand and do so in a cost effective manner. Our “build-to-order” manufacturing model, in which our hardware systems products generally are not built until after customers place orders, may from time to time experience delays in delivering our hardware systems products to customers in a timely manner. These delays could cause our customers to purchase hardware products and services from our competitors. We must also manage new hardware product introductions and transitions to minimize the demandsimpact of customer delayed purchases of existing hardware systems products in anticipation of new hardware systems product releases. It is also possible that we could experience design or manufacturing flaws which could delay or prevent the production of the components for which we have previously committed to pay or need to fulfill orders from customers and could also prevent the production of our hardware systems customersproducts or cause our hardware products to be returned, recalled or rejected resulting in lost revenues, increases in warranty costs or costs related to remediation efforts, damage to our reputation, penalties and to avoid component inventory write-downs.    litigation.

We depend on suppliers to design, develop, manufacture and deliver on a timely basis

the necessary technologies and components for our hardware products. While many of the components purchased are standard, some components (standard or otherwise) require long lead times to manufactureproducts, and deliver. Furthermore, there are some technologies and components that can only be purchased from a single vendor due to price, quality, technology, availability or other business constraints. As a result, our supply chain operations could be disrupted or negatively impacted by natural disasters, political unrest, port stoppages or other transportation disruptions or slowdowns or other factors affecting the countries or regions where these single source component vendors are located.located or where the products are being shipped. We may be unable to purchase these items from the respective single vendors on acceptable terms or may experience significant delays or quality issues in the delivery of necessary technologies, parts or components from a particular vendor. If we had to find a new supplier for these technologies, parts and components, hardware systems product shipments could be delayed, which would adversely affect our hardware systems revenues. We could also experience fluctuations in component prices which, if unanticipated, could negatively impact our hardware systems business cost structure. Additionally, we could experience changes in shipping and logistics of our hardware products, which could result in fluctuations in prices and negatively impact our hardware systems margins. These factors may make it difficult for us to plan and procure appropriate component inventory levels in a timely fashion to meet customer demand for our hardware products. Therefore, we may experience component inventory shortages which may result in production delays or customers choosing to purchase fewer hardware products from us or systems products from our competitors. We negotiate supply commitments with vendors early in the manufacturing process to ensure we have sufficient technologies and components for our hardware products to meet anticipated customer demand. We must also manage our levels of older component inventories used in our hardware products to minimize inventory write-offs or write-downs. If we have excess inventory, it may be necessary to write-down the inventory, which would adversely affect our operating results. If one or more of the risks described above occurs, our hardware systems business and related operating results could be materially and adversely affected.

We expect to continue to depend on third party manufacturers to build certain hardware systems products and third party logistics providers to deliver our products. As such, we are susceptible to third party manufacturing and logistics delays, thatwhich could prevent us from shipping customer orders on time, if at all, and may result in the loss of sales and customers.    We outsource the design, manufacturing, assembly and delivery of certain of our hardware products to a variety of companies, many of which are located outside the United States. Our reliance on these third parties reduces our control over the design, manufacturing and delivery process, exposing us to risks, including reduced control over quality assurance, product costs, product supply and delivery delays as well as the political and economic uncertainties and natural disasters of the international locations where certain of these third party manufacturers have facilities and operations. Some countries may raise national security concerns or

impose market access restrictions based on location of manufacture or sourcing. Any manufacturing disruption or logistics delays by these third parties could impair our ability to fulfill orders for these hardware systems products for extended periods of time. If we are unable to manage our relationships with these third parties effectively, or if these third parties experience delays, disruptions, capacity constraints, regulatory issues or quality control problems in their operations, or fail to meet our future requirements for timely delivery, our ability to ship and/orand deliver certain of our hardware systems products to our customers could be impaired and our hardware systems business could be harmed.

We have simplified our supply chain processes by reducing the number of third party manufacturing partners and the number of locations where these third party manufacturers build our hardware systems products. We therefore have become more dependent on a fewer number of these manufacturing partners and locations. If these partners experience production problems or delays or cannot meet our demand for products, we may not be able to find alternate manufacturing sources in a timely or cost effective manner, if at all. If we are required to change third party manufacturers, our ability to meet our scheduled hardware systems products deliveries to our customers could be adversely affected, which could cause the loss of sales and existing or potential customers, delayed revenue recognition or an increase in our hardware systems products expenses, all of which could adversely affect the margins of our hardware business.

These challenges and risks also exist when we acquire companies with hardware products and related supply chain operations. In some cases, we may be dependent, at least initially, on these acquired companies’ supply chain operations that we are less familiar with and thus we may be slower to adjust or react to these challenges and risks.

We may experience foreign currency gainsOur software indirect sales channel could affect our future operating results.    Our software indirect channel network is comprised primarily of resellers, system integrators/implementers, consultants, education providers, internet service providers, network integrators and losses.    We conductindependent software vendors. Our relationships with these channel participants are important elements of our software marketing and sales efforts. Our financial results could be adversely affected if our contracts with channel participants were terminated, if our relationships with channel participants were to deteriorate, if any of our competitors enter into strategic relationships with or acquire a significant number of transactions in currencies other thanchannel participant, if the U.S. Dollar. Changes in the value of major foreign currencies, particularly the Euro, Japanese Yen and British Pound relative to the U.S. Dollar can significantly affect our revenues and operating results. Generally, our revenues and operating results are adversely affected when the dollar strengthens relative to other currencies and are positively affected when the dollar weakens.

In addition, we incur foreign currency transaction gains and losses, primarily related to sublicense fees and other intercompany agreements among us and our subsidiaries that we expect to cash settle in the near term, which are

charged against earnings in the period incurred. We have a program which primarily utilizes foreign currency forward contracts to offset the risks associated with these foreign currency exposures that we may suspend from time to time. As a part of this program, we enter into foreign currency forward contracts so that increasesfinancial condition or decreases in our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with our foreign currency transaction gains or losses. A large portionoperations of our consolidated operations are internationalchannel participants were to weaken or if the level of demand for our channel participants’ products and we expectservices were to decrease. There can be no assurance that we will continue to realize gainsbe successful in maintaining, expanding or lossesdeveloping our relationships with respect to our foreign currency exposures, net of gains or losses from our foreign currency forward contracts. For example,channel participants. If we will experience foreign currency gainsare not successful, we may lose sales opportunities, customers and losses in certain instances if it is not possible or cost effective to hedge our foreign currency exposures or should we suspend our foreign currency forward contract program. Our ultimate realized loss or gain with respect to currency fluctuations will generally depend on the size and type of cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, whether we have entered into foreign currency forward contracts to offset these exposures and other factors. All of these factors could materially impact our results of operations, financial position and cash flows, the timing of which is variable and generally outside of our control.revenues.

We may not be able to protect our intellectual property rights.    We rely on copyright, trademark, patent and trade secret laws, confidentiality procedures, controls and contractual commitments to protect our intellectual property rights. Despite our efforts, these protections may be limited. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. Any patents owned by us may be invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope of the claims we seek, if at all. In addition, the laws of some countries do not provide the same level of protection of our intellectual property rights as do the laws and courts of the United States. If we cannot protect our intellectual property rights against unauthorized copying or use, or other misappropriation, we may not remain competitive.

Third parties have claimed and, in the future, may claim infringement or misuse of intellectual property rights and/or breach of license agreement provisions.    We periodically receive notices from, or have lawsuits filed against us by, others claiming infringement or other misuse of their intellectual property rights and/or breach of our agreements with them. These third parties include entities that do not have the capabilities to design, manufacture, or distribute products or services or that acquire intellectual property like patents for the sole purpose of monetizing their acquired intellectual property through asserting claims of infringement and misuse. We expect the number of such claims will increase as:

Responding to any such claim, regardless of its validity, could:

We may lose key employees or may be unable to hire enough qualified employees.    We rely on the continued service of our senior management, including our Executive Chairman of the Board of Directors, Chief ExecutiveTechnology Officer and founder, our Chief Executive Officers, other members of our executive team and other key employees and the hiring of new qualified employees. In the technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. In addition, acquisitions could cause us to lose key personnel of the acquired companies or at Oracle. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales. We may not be successful in recruiting new personnel and in retaining and motivating existing personnel. With rare exceptions, we do not have long-term employment or non-competition agreements with our employees. Members of our senior management team have left Oracle over the years for a variety of reasons, and we cannot assure you that there will not be additional departures, which may be disruptive to our operations.

We continually focus on improving our cost structure by hiring personnel in countries where advanced technical expertise isand 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 general compensation program includes stock options and restricted stock units (RSUs), which are an important tooltools 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 have changed and may in the future change our stock-based and other compensation practices. SomeFor example, in fiscal 2015, we introduced RSU grants for certain of theour employees and performance related stock unit grants for certain of our executives. We continue to evaluate our compensation practices and other changes we consider from time to time include a reduction in the number of employees granted options,equity awards, a reduction in the number of stock options or RSUs granted per employee and a change to alternative forms of stock-based compensation.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. OurFurther, 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 the pricing of our on-premises enterprise software offerings and our cloud offerings, as well as overall demand for our on-premises 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 licenselicenses 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 new license prices.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. Additionally, increased distribution of applications through cloud and SaaS providers, may reduce the average price for our products or adversely affect other sales of our products, reducing our revenues unless we can offset price reductions with volume increases. The increase in open source software distribution may also cause us to change our pricing models.

Our cloud computing strategy, including our Oracle Cloud and Oracle managed cloud services offerings, may not be successful.    We offer customers a broad portfolio of software and hardware products and services to enable a roadmap for customers to adopt cloud computing. Oracle Cloud includes our cloud software subscription offerings such as Oracle Fusion Human Capital Management Cloud Service, Oracle Fusion Customer Relationship Management Cloud Service, Oracle RightNow Customer Experience and Oracle Taleo Talent Management Cloud Service, among others, all of which provide our customers with certain of our software applications functionality within a cloud-based IT environment that we manage and offer via a subscription-based model. In addition, Oracle Cloud also includes software platforms within a cloud-based IT environment that we manage and offer to customers via a subscription-based model including Oracle Database Cloud Service and Oracle Java Cloud Service. Oracle managed cloud services include software and hardware management and maintenance services hosted at our data center facilities, select partner data centers or physically on-premise at customer facilities. These business models continue to evolve and we may not be able to compete effectively, generate significant revenues or maintain their profitability. We incur expenses associated with the infrastructures and marketing of our managed cloud services and cloud software subscription offerings in advance of our ability to recognize the revenues associated with these offerings. Demand for our cloud software subscription offerings may unfavorably impact demand for certain of our other products and services including new software licenses and software license updates and product support services.

If our data protection or other security measures are compromised and as a result our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged, the IT services we provide to our customers could be disrupted, and customers may stop using our products and services, all of which could reduce our revenue and earnings, increase our expenses and expose us to legal claims and regulatory actions.    We are in the information technology business, and our products and services store, retrieve, manipulate and manage our customers’ information and data as well as our own. We have a reputation for secure and reliable software and hardware products and services and have invested a great deal of time and resources in protecting the integrity and security of our products, services and internal and external data that we manage.

Nevertheless, computer hackers will attempt to penetrate or bypass our data protection and other security measures and gain unauthorized access to our networks, systems and data or compromise the confidential information or data of our customers. Computer hackers may be able to develop and deploy IT related viruses, worms, and other malicious software programs that could attack our products and services, exploit potential security vulnerabilities of our products and services, create system disruptions and cause shutdowns or denials of service. Data may also be accessed or modified improperly as a result of employee or supplier error or malfeasance and third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data, our customers’ data or our IT systems.

Although this is an industry-wide problem that affects other software and hardware companies, it affects Oracle in particular because computer hackers tend to focus their efforts on the most popular or well-known IT companies, and they may focus on Oracle because of our reputation for, and marketing efforts associated with, having secure products and services. These risks for us will increase as we continue to grow our cloud-based offerings and services and store and process increasingly large amounts of our customers’ confidential information and data and host or manage parts of our customers’ businesses in cloud-based IT environments, especially in customer sectors involving particularly sensitive data such as health sciences, financial services and the government. We also have an active acquisition program and have acquired a number of companies, products, services and technologies over the years. While we make significant efforts to address any IT security issues with respect to our acquisitions, we may still inherit such risks when we integrate these acquisitions within Oracle.

If a cyberattack or other security incident described above were to allow unauthorized access to or modification of our customers’ data or our own data or our IT systems or if the services we provide to our customers were disrupted, or if our products or services are perceived as having security vulnerabilities, we could suffer damage to our brand and reputation. Customers could lose confidence in the security and reliability of our products and

services and perceive them to be not secure. This in turn could lead to fewer customers using our products and services and result in reduced revenue and earnings. The costs we would incur to address and fix these security incidents would increase our expenses. These types of security incidents could also lead to lawsuits, regulatory investigations and claims and increased legal liability, including in some cases contractual costs related to customer notification and fraud monitoring.

Further, as regulatory focus on privacy issues continues to increase and worldwide laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business will intensify. Changes in laws or regulations associated with the protection of certain types of data, such as healthcare data or other personally identifiable information, could greatly increase our cost of providing our products and services.

Our periodic workforce restructurings can be disruptive.    We have in the past restructured or made other adjustments to our workforce, including our direct sales force on which we rely heavily, in response to management changes, product changes, performance issues, acquisitions and other internal and external considerations. In the past, sales force and other restructurings have generally resulted in a temporary lack of focus and reduced productivity. These effects could recur in connection with future acquisitions and other restructurings and our revenues could be negatively affected.

We might experience significant errors in our software and hardware products and services.    Despite testing prior to their release, software and hardware products sometimes contain errors, especially when first introduced or when new versions are released. The detection and correction of any errors can be time consuming and costly. Errors in our software or hardware products could affect the ability of our products to work with other software or hardware products, could delay the development or release of new products or new versions of products and could adversely affect market acceptance of our products. If we experience errors or delays in releasing our new software or hardware products or new versions of our software or hardware products, we could lose revenues. In addition, we run our own business operations, cloud software subscription offerings, Oracle managed cloud services and other outsourcing services, support and consulting services, on our products and networks and any flaws, if exploited, could affect our ability to conduct our business operations. End users, who rely on our software products and services for applications that are critical to their businesses, may have a greater sensitivity to product errors than customers for software products generally. Errors in our software and hardware products or services could expose us to product liability, performance and/or warranty claims as well as harm our reputation, which could impact our future sales of products and services.

We may not receive significant revenues from our current research and development efforts for several years, if at all.    Developing software, cloud and hardware productsofferings is expensive and the investment in productthe development of these offerings often involves a long return on investment cycle. We have made and expectAn important element of our corporate strategy is to continue to make significant investments in research and development and related product opportunities.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 productsoftware and hardware life cycles require high levels of expenditures for research and development that could adversely affect our operating results if not offset by revenue increases. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we do not expect to receive significant revenues from these investments for several years, if at all.

Business disruptions could adversely affect our operating results.    A significant portion of our research and development activities and certain other critical business operations are concentrated in a few geographic areas. We are a highly automated business and a disruption or failure of our systems could cause delays in completing sales and providing services, including some of our cloud software subscription and managed cloud services offerings. A major earthquake, fire or other catastrophic event that results in the destruction or disruption of any of our critical business or IT systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be materially and adversely affected.

Adverse litigation results could affect our business.    We are subject to various legal proceedings. Litigation can be lengthy, expensive and disruptive to our operations, and can divert our management’s attention away from running our core business. The results of our litigation also cannot be predicted with certainty. An adverse decision could result in monetary damages or injunctive relief that could affect our business, operating results or financial condition. Additional information regarding certain of the lawsuits we are involved in is discussed under Note 18 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

We may have exposure to additional tax liabilities.    As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. We are regularly under audit by tax authorities and those authorities often do not agree with positions taken by us on our tax returns.

Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate. For example, certain U.S. government proposals for fundamental U.S. internationalthe United States, many countries in the EU, and other countries where we do business, are actively considering changes in relevant tax, reform,accounting and other laws, regulations and interpretations, including changes to tax laws applicable to corporate multinationals, which, if enacted, could have a significant adverse impact on our effective tax rate. Further, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. Our intercompany transfer pricing has been and is currently being reviewed by the U.S. Internal Revenue Service (IRS) and by foreign tax jurisdictions and will likely be subject to additional audits in the future. WeAlthough, we have negotiated certain unilateral Advance Pricing Agreements with the IRS and certain selected bilateral Advance Pricing Agreements that cover manysome of our intercompany transfer pricing issues and preclude the relevant tax authorities from making a transfer pricing adjustment within the scope of these agreements. However,agreements, these agreements do not cover substantial elements of our transfer pricing. In recent periods, transfer pricing audits in many foreign jurisdictions have become increasingly contentious. Similarly, certain jurisdictions are increasingly raising concerns about certain withholding tax matters. In addition, our provision for income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions which we consider to be indefinitely reinvested outside the United States that have lower statutory tax rates and earnings being higher than anticipated in jurisdictions that have higher statutory tax rates.

We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income based taxes and may have exposure to additional non-income based tax liabilities. Our acquisition activities have increased our non-income based tax exposures, particularly with our entry into the hardware systems business, which increased the volume and complexity of laws and regulations that we are subject to and with which we must comply.

Although we believe that our income and non-income based tax estimates are reasonable, there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.

Charges to earnings resulting from acquisitions may adversely affect our operating results.    Under business combination accounting standards pursuant to ASC 805,Business Combinations, we recognize the identifiable assets acquired, the liabilities assumed and any non-controlling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is measured as the excess amount of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Our estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain. After we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and may adversely affect our cash flows:

Substantially all of these costs will be accounted for as expenses that will decrease our net income and earnings per share for the periods in which those costs are incurred. For example, we recognized a goodwill impairment loss in the fourth quarter of fiscal 2015 relating to our hardware systems reporting unit. Charges to our operating results in any given period could differ substantially from other periods based on the timing and size of our future acquisitions and the extent of integration activities. A more detailed discussion of our accounting for business combinations and other items is presented in the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7).

There are risks associated with our outstanding and future indebtedness.    As of May 31, 2012,2015, we had an aggregate of $16.5$42.0 billion of outstanding indebtedness that will mature between the remainder of calendar 2012year 2016 and calendar 2040year 2055 and we may incur additional indebtedness in the future. Our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations, generate sufficient cash flows to service such debt and the other factors discussed in this section. There can be no assurance that we will be able to manage any of these risks successfully.

We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. Should we incur future increases in interest expense, our ability to utilize certain of our foreign tax credits to reduce our U.S. federal income tax could be limited, which could unfavorably affect our provision for income taxes and effective tax rate. In addition, changes by any rating agency to our outlook or credit rating could negatively affect the value of both our debt and equity securities and increase the interest amounts we pay on outstanding or future debt. These risks could adversely affect our financial condition and results of operations.

Environmental and other related laws and regulations subject us to a number of risks and could result in significant liabilities and costs.    Some of our cloud and hardware systems operations are subject to state, federal and international laws governing protection of the environment, proper handling and disposal of materials used to manufacture ourfor these products, human health and safety, and regulating the use of certain chemical substances.substances and the labor practices of suppliers. We endeavor to comply with these environmental and other laws, yet compliance with suchthese environmental and other laws could increase our product design, development, procurement, manufacturing, delivery and manufacturingadministration costs, limit our ability to manage excess and obsolete non-compliant inventory, change our sales activities, or otherwise impact future financial results of our cloud and hardware systems business.businesses. Any violation of these laws can subject us to significant liability, including fines, penalties and possible prohibition of sales of our products and services into one or more states or countries and result in a material adverse effect on the financial condition or results of operations of our cloud and hardware systems business. businesses.

The U.S. Securities and Exchange Commission has adopted disclosure requirements for companies that use certain “conflict minerals” (commonly referred to as tantalum, tin, tungsten and gold) in their products. Our supply chain is multi-tiered, global and highly complex. As a provider of hardware systems end products, we are several steps removed from the mining and smelting or refining of any conflict minerals in our supply chain. Accordingly, our ability to determine with certainty the origin and chain of custody of conflict minerals is limited. Our relationships with customers and suppliers could suffer if we are unable to describe our products as “conflict-free.” We may also face increased costs in complying with conflict minerals disclosure requirements.

A significant portion of our hardware systems revenues come from international sales. Environmental legislation, within the European Union (EU), includingsuch as the EU Directive on Restriction of Hazardous Substances (RoHS) and, the EU Waste Electrical and Electronic Equipment Directive (WEEE Directive), as well as and China’s regulation on Management Methods for Controlling Pollution Caused by Electronic Information Products, may increase our cost of doing business internationally and impact our hardware systems revenues from the EU, China and other countries and Chinawith similar environmental legislation as we endeavor to comply with and implement these requirements. In addition, similar environmental legislation has been or may be enacted in other jurisdictions, theThe cumulative impact of whichinternational environmental legislation could be significant.

Our stock price could become more volatile and your investment could lose value.    All of the factors discussed in this section could affect our stock price. The timing of announcements in the public market regarding new products, product enhancements or technological advances by our competitors or us and any announcements by us of acquisitions, major transactions, or management changes could also affect our stock price. Changes in the amounts and frequency of share repurchases or dividends could adversely affect our stock price. Our stock price is subject to speculation in the press and the analyst community, changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock, our credit ratings and market trends unrelated to our performance. A significant drop in our stock price could also expose us to the risk of securities class actions lawsuits, which could result in substantial costs and divert management’s attention and resources, which could adversely affect our business.

Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties

Our properties consist of owned and leased office facilities for sales, support, research and development, consulting, manufacturing and administrative personnel. Our headquarters facility consists of approximately 2.12.0 million square feet in Redwood City, California, substantially all of which we own. We lease our principal internal manufacturing facility for our hardware systems products in Hillsboro, Oregon. We also own or lease other office facilities for current use consisting of approximately 24.925.6 million square feet in various other locations in the United States and abroad. We believe our facilities are in good condition and suitable for the conduct of our business. Approximately 5.12.5 million square feet, or 19%9%, of total owned and leased space is sublet or is being actively marketed for sublease or disposition.

Item 3.    Legal Proceedings

The material set forth in Note 18 of Notes to Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K is incorporated herein by reference.

Item 4.    Mine Safety Disclosures

None.

PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange under the symbol “ORCL”. Prior to July 15, 2013, our common stock traded on the NASDAQ Global Select Market under the symbol “ORCL” and has been traded on the NASDAQ since our initial public offering in 1986.. According to the records of our transfer agent, we had 15,26911,383 stockholders of record as of May 31, 2012.2015. The following table sets forth the low and high sale priceprices per share of our common stock, based on the last daily sale, in each of our last eight fiscal quarters.

We declared and paid cash dividends totaling $0.24$0.51 and $0.21$0.48 per outstanding common share over the course of fiscal 20122015 and 2011,fiscal 2014, respectively.

In June 2012,2015, our Board of Directors declared a quarterly cash dividend of $0.06$0.15 per share of our outstanding common stock payable on August 3, 2012July 29, 2015 to stockholders of record as of the close of business on July 13, 2012.8, 2015. We currently expect to continue paying comparable cash dividends on a quarterly basis; however, future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report.

Stock Repurchase Programs

Our Board of Directors has approved a program for us to repurchase shares of our common stock. On December 20, 2011,September 18, 2014, we announced that our Board of Directors approved an expansion of our stock repurchase program by an additional $5.0 billion. On June 18, 2012, we announced that our Board of Directors approved a further expansion by an additional $10.0$13.0 billion. Approximately $3.1$9.2 billion remained available for stock repurchases as of May 31, 20122015 pursuant to our stock repurchase program prior to the additional amount authorized in June 2012.program.

Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

The following table summarizes the stock repurchase activity for the three months ended May 31, 20122015 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:

Stock Performance Graph and Cumulative Total Return

The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P Information Technology Index for each of the last five fiscal years ended May 31, 2012,2015, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.

*$100 INVESTED ON MAY 31, 20072010 IN STOCK OR

INDEX-INCLUDING REINVESTMENT OF DIVIDENDS

Item 6.    Selected Financial Data

The following table sets forth selected financial data as of and for the last five fiscal years. This selected financial data should be read in conjunction with the consolidated financial statements and related notes included in Item 15 of this Annual Report. Over the last five fiscal years, we have acquired a number of companies, including Sun Microsystems, Inc. in fiscal 2010 and BEAMICROS Systems, Inc. in fiscal 2008,2015, among others. The results of our acquired companies have been included in our consolidated financial statements since their respective dates of acquisition and have contributed to our growth in revenues, income, earnings per share and total assets.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our key operating business segments and significant trends. This overview is followed by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.

Business Overview

We are the world’s largest provider of enterprise software and a leading provider of computer hardwareOracle Corporation provides products and services.services that address all aspects of corporate information technology (IT) environments—application, platform and infrastructure—and are available to customers either via cloud computing or on-premises deployment models. Our software, hardware systems, and services businesses develop, manufacture, market, host and supportproducts include database and middleware software, applicationsapplication software, cloud infrastructure software, and hardware systems (Oracle Engineered Systems, servers, storage, networking and industry specific products), along with the latter consisting primarily of computer serversupport and storage products. Our businesses provide products and services that are built upon industry standards, are engineered to work together or independently within existing customer information technology (IT) environments and run securely on a wide range of customer IT environments, including cloud computing environments.

Cloud computing environments provide on demand access to a shared pool of computing resources in a scalable, self-service manner, delivering advantages in speed, agility and efficiency. Cloud computing has evolved from technologies and services that Oracle has provided for many years, including clustering, server virtualization, Service-Oriented Architecture (SOA), shared services, large-scale management automation, and more recently, engineered systems. Our secure, reliable and scalable product offerings are designed to improve business efficiencies at a low total cost of ownership.related services. We seek to be an industry leader in each of the product offering categories in which we compete and to expand into new and emerging markets.

We believe our ability to offer our customers choice and flexibility in the manner in which they deploy our products and services—while maintaining enterprise-grade reliability, security and interoperability based upon industry-standards—is important to our corporate strategy. Oracle Fusion Applications, for example, offerover 400,000 worldwide customers a choice of deployment models to runbest suit their needs including (1) the deployment of our standards-based software applications in on-premiseproducts via our Oracle Cloud offerings, (2) the acquisition of Oracle products and services for an on-premises IT environment or (3) a mix of these two models.

For customers opting for a cloud computing model, Oracle offers a wide range of services in all three primary layers of the cloud: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Our Oracle Cloud offerings are designed to be: rapidly deployable to enable customers shorter time to innovation; easily maintainable to reduce integration and testing work; and cost effective by requiring lower upfront customer investment. Our Oracle Cloud offerings integrate the software, hardware and services on the customers’ behalf in IT environments that we deploy, support and manage for the customer. We are a leader in the core technologies of cloud IT environments, including database and middleware software as well as enterprise applications, virtualization, clustering, large-scale systems management and related infrastructure. Our products and services are the building blocks of our Oracle Cloud services, our partners’ cloud services and our customers’ cloud IT environments.

In addition to offering a broad spectrum of cloud products and services, Oracle for decades has developed and sold its products and services to our customers worldwide for use in their global data centers and on-premises IT environments. Oracle Cloud, a familyAn important element of our cloud-based software subscription offerings, provides accesscorporate strategy is to select Oracle software applicationscontinue our investments in, and software platforms on a subscription basis in a secure, standards-based cloud computing environment. Oracle Cloud includes software applications as a service, such as Oracle Fusion Human Capital Management Cloud Service and Oracle Fusion Customer Relationship Management Cloud Service, and software platform services such as Oracle Database Cloud Service and Oracle Java Cloud Service, among others.

We believe our internal growth and continued innovation with respect to, our products and services that we offer through our software and cloud, hardware and services businesses are the foundation of our long-term strategic plans.businesses. In each of fiscal 20122015, 2014 and 2011,2013, we invested $4.5$5.5 billion, $5.2 billion and in fiscal 2010 we invested $3.3$4.9 billion, respectively, in research and development to enhance our existing portfolio of products and services and to develop new products and services. We have a deep understanding as to how all components within IT environments—application, platform and infrastructure—interact and function with one another. We focus our development efforts on improving the performance, operation and integration of these differing technologies to make them more cost-effective and easier to deploy, manage and maintain for our customers and to improve their computing performance relative to our competitors. After purchasing Oracle products and services, customers can continue to take advantage of Oracle’s research and development investments and deep IT expertise by purchasing and renewing Oracle support offerings, which may include product enhancements that we periodically deliver to our Oracle E-Business Suite, Siebel, PeopleSoft and JD Edwards application software products, among others, or renewing their SaaS, PaaS and IaaS contracts with us.

Oracle customers are increasingly electing to run their IT environments using our suite of Oracle Cloud offerings. As customers deploy with the Oracle Cloud, many are adopting a hybrid IT model whereby certain of their IT resources are deployed and managed through the Oracle Cloud, while other of their IT resources are deployed and managed on-premises, and both sets of resources can be managed as one. We focus the engineering of our hardwareproducts and software productsservices to make them work together more effectivelybest connect these different deployment models to enable flexibility, ease, agility, compatibility, extensibility and deliver improved computing performance, reliability,seamlessness.

A selective and security to our customers. For example, Oracle Engineered Systems, which include our Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, and SPARC SuperCluster products, amongst others, combine certain of our hardware and software offerings to provide engineered systems that increase computing performance and reduce storage requirements relative to our competitors’ products, creating time savings, efficiencies, and operational cost advantages for our customers.

We also believe that an active acquisition program is ananother important element of our corporate strategy as it strengthensstrategy. We believe our competitive position, enhancesacquisitions enhance the products and services that we can offer to customers, expandsexpand our customer base, providesprovide greater scale to accelerate innovation, growsgrow our revenues and earnings, and increasesincrease stockholder value.

In recent years, we have invested billions of dollars to acquire a number of companies, products, services and technologies that add to, are complementary to, or have otherwise enhanced our existing offerings. We expect to continue to acquire companies, products, services and technologies to further our corporate strategy.

We are organized intohave three businesses—businesses that deliver our application, platform and infrastructure technologies: software and cloud, hardware systems, and services—which areservices. These businesses can be further divided into certain operating segments. Priorsegments (Note 16 of Notes to Consolidated Financial Statements, included elsewhere in this Annual Report, provides additional information related to our acquisition of Sun Microsystems, Inc. (Sun) in January 2010, we did not have a hardware systems business or related operating segments.segments). Each of our businesses and operating segments has unique characteristics and faces different opportunities and challenges. Although we report our actual results in U.S. Dollars, we conduct a significant number of transactions in currencies other than U.S. Dollars. Therefore, we present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effecteffects of foreign currency rate fluctuations. An overview of our three businesses and related operating segments follows.

Software and Cloud Business

Our software and cloud business, which represented 70%77%, 68%76% and 77%75% of our total revenues in fiscal 2012, 20112015, 2014 and 2010,2013, respectively, is comprised of twothree operating segments: (1) new software licenses and cloud software subscriptions, (2) cloud infrastructure as a service and (3) software license updates and product support. On a constant currency basis, we expect that our software and cloud business’ total revenues generally will continue to increase due to continued demand for our software products and cloud software subscription offerings, our software license updates and product support offerings, including the high percentage of customers that renew their software license updates and product support contracts, and due to our acquisitions, which should allow us to grow our profits and continue to make investments in research and development.

New Software Licenses:Licenses and Cloud Software Subscriptions:    We licenseOur new software licenses and cloud software subscriptions line of business markets, sells and delivers our databaseapplication and middlewareplatform technologies including our SaaS and PaaS offerings (our SaaS and PaaS offerings are collectively referred to as well as our applicationscloud software andsubscriptions), which provide subscription-based access to select Oraclecustomers a choice of software applications and software platforms throughthat are delivered via a cloud-based IT environment that we host, manage and support, and the licensing of our software products including Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others. Our application and platform technologies are substantially built on standards-based architectures that are designed to help customers reduce the cost and complexity of their IT infrastructure. Our commitment to industry standards results in software that works in customer environments with Oracle or non-Oracle hardware or software components and that can be adapted to meet specific industry or business needs. We focus the engineering of our products and services to best connect cloud and on-premises deployment models to enable flexibility, ease, agility, compatibility, extensibility and seamlessness. Our software offerings are substantially designed to operate on both single server and clustered server configurations for cloud or on-premises IT environments, and to support a choice of operating systems including Oracle Solaris, Oracle Linux, Microsoft Windows and third party UNIX products, among others. These approaches are designed to support customer choice and reduce customer risk. Our customers include businesses of many sizes, government agencies, educational institutions and resellers. We market and sell our software products and services to these customers with a sales force positioned to offer the combinations that best fit their needs. We enable customers to evolve and transform to substantially any IT environment at whatever pace is most appropriate for them.

The growth in our new software licenselicenses and our SaaS and PaaS revenues that we report is affected by the strength of general economic and business conditions, governmental budgetary constraints, the competitive position of our software products,offerings, our acquisitions and foreign currency fluctuations. The substantial majority of our new software license business is alsotransactions are characterized by long sales cycles. Thecycles and the timing of a few large software license transactions can substantially affect our quarterly new software licenselicenses revenues. Since our new software license revenues in a particular quarter can be difficult to predict as a result of the timing of a few large software license transactions, we believe that analysis of new software license revenues on a trailing 4-quarter period (as provided in our Quarterly Reports on Form 10-Q) provides additional visibility into the underlying performance of our new software license business. New software licenselicenses and cloud software subscriptions revenues represented 27%, 26% and 28% of our total revenues in fiscal 2012, 20112015 and 2010, respectively. The proportion of our new software license revenues relative to our total revenues was affected by our entry into the hardware systems business as a result of our acquisition of Sun28% in the third quartereach of fiscal 2010.2014 and 2013. Our cloud software subscriptions contracts, which consist of SaaS and PaaS arrangements, are generally one to three years in duration and we strive to renew these contracts when they are eligible for renewal. Our new software licenselicenses and cloud software subscriptions segment’s margins havemargin has historically trended upward over the course of the four quarters within a particular fiscal year due to the historical

upward trend of our new software licenselicenses revenues over those quarterly periods and because the majority of our costs for this segment are predominantly fixed in the short-term. However, our new software licenselicenses and cloud software subscriptions segment’s margins havemargin has been and will continue to be affected by the fair value adjustments relating to the cloud software subscriptionSaaS and PaaS obligations that we assumed in our business combinations (described further below) and by the amortization of intangible assets associated with companies and technologies that we have acquired.

WeFor certain of our acquired businesses, we recorded adjustments to reduce obligations under our assumedthe cloud software subscription offerings in business combinationsSaaS and PaaS obligations to their estimated fair values at the acquisition dates. As a result, as required by business combination accounting rules, we did not recognize cloud software subscriptionSaaS and PaaS revenues as a part of our new software licenses revenuesrelated to acquired contracts that would have been otherwise recorded as revenues by the acquired businesses as independent entities in the amountamounts of $22$12 million, $17 million and $45 million in fiscal 2012.2015, 2014 and 2013, respectively. To the extent underlying cloud software subscriptionSaaS and PaaS contracts are renewed with us following an acquisition, we will recognize the revenues for the full valuevalues of the cloud software subscriptionthese contracts over the contracttheir respective contractual periods.

Cloud Infrastructure as a Service:    Our cloud infrastructure as a service offerings, which represented 2% of our total revenues in fiscal 2015 and 1% in each of fiscal 2014 and 2013, provide comprehensive software and hardware management and maintenance services for customer IT infrastructure for a fee for a stated term that is hosted at our Oracle data center facilities, select partner data centers or physically on-premises at customer facilities; deployment and management offerings for our software and hardware and related IT infrastructure including virtual machine instances that are subscription-based and designed for computing and reliable and secure object storage; and certain of our Oracle Engineered Systems and related support offerings that are deployed in our customers’ data centers for a monthly fee.

Software License Updates and Product Support:    Customers that purchase software license updates and product support are granted rights to unspecified product upgrades and maintenance releases issuedand patches released during the term of the support period, as well as technical support assistance. Our software license updates and product support contracts are generally one year in duration. Substantially all of our software license customers renew their software license updates and product support contracts annually. The growth of software license updates and product support revenues is primarily influenced by three factors: (1) the percentage of our software support contract customer base that renews its software support contracts, (2) the amount of new software support contracts sold in connection

with the sale of new software licenses and (3) the amount of software support contracts assumed from companies we have acquired.

Software license updates and product support revenues, which represented 43%49%, 42%47% and 49%46% of our total revenues in fiscal 2012, 20112015, 2014 and 2010,2013, respectively, is our highest margin business unit. The proportion of ourOur software license updates and product support 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. Marginsmargins during fiscal 20122015 were 87%90% and accounted for 72%81% of our total margins over the same period. Our software license updateupdates and product support margins have been affected by fair value adjustments relating to software support obligations assumed in business combinations (described further below) and by amortization of intangible assets. However, over the longer term, we believe that software license updates and product support revenues and margins will grow for the following reasons:

We recorded adjustments to reduce software support obligations assumed in business combinations to their estimated fair values at the acquisition dates. As a result, as required by business combination accounting rules,

we did not recognize software license updates and product support revenues related to software support contracts that would have been otherwise recorded by the acquired businesses as independent entities in the amounts of $48$11 million, $80$3 million and $86$14 million in fiscal 2012, 20112015, 2014 and 2010,2013, respectively. To the extent underlying software support contracts are renewed with us following an acquisition, we will recognize the revenues for the full valuevalues of the software support contracts over the respective support periods, the majority of which are one year.

Hardware Systems Business

Our hardware systems business consistsis comprised of two operating segments: (1) hardware systems products and (2) hardware systems support. Our hardware business represented 17%, 19% and 9%14% of our total revenues in fiscal 2012, 20112015, 2014 and 2010, respectively.2013. We expect our hardware business to have lower operating margins as a percentage of revenues than our software and cloud business due to the incremental costs we incur to produce and distribute these products and to provide support services, including direct materials and labor costs. We expect to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services.

Hardware Systems Products:    We provide a completebroad selection of hardware systems and related services including Oracle Engineered Systems, servers, storage, networking, workstations and related devices, industry specific hardware, virtualization software, operating systems, and management software to support diverse IT environments, including public and private cloud computing environments. We engineer our hardware systems with virtualization and management capabilities to enable the rapid deployment and efficient management of cloud and on-premises IT infrastructures. Our hardware systems products consist primarilysupport many of computer server, storage and hardware-related software,the world’s largest cloud infrastructures, including ourthe Oracle Solaris operating system. Cloud.

Our hardware systems component products are designed to be “open,” oreasier to deploy, manage and maintain for our customers and to improve computing performance relative to our competitors’ offerings. We design our hardware products to seamlessly connect on-premises and cloud IT environments to further enable interoperability, interchangeability and extendibility and to work in customer environments that may include other Oracle or non-Oracle hardware or software components. We have also engineeredOur flexible and open approach provides Oracle customers with a broad range of choices in how they deploy our hardware systems products, to create performance and operational cost advantageswhich we believe is a priority for customers when our hardware and software products are combined as Oracle Engineered Systems.

Our Oracle Engineered Systems include Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In-Memory Machine, SPARC SuperCluster, Oracle Database Applianceare core to our hardware offerings and the Oracle Big Data Appliance. By combiningare important elements of our server and storage hardware with our software, our open, integrated products better address customer on-premisedata center and cloud computing requirementsofferings including the Oracle Cloud. These pre-integrated products are designed to integrate multiple Oracle technology components to work together to deliver improved performance, availability, security and operational efficiency relative to our competitors’ products, to be upgraded effectively and efficiently and to simplify maintenance cycles by providing a single solution for performance, scalability, reliability, security, ease of managementsoftware patching. Oracle Engineered Systems are tested before they are shipped to customers and lower total cost of ownership.delivered ready-to-run, enabling customers to shorten the time to production.

We offer a wide range of server systems using our SPARC microprocessor. Our SPARC servers run the Oracle Solaris operating system and are designed to be differentiated by their reliability, security, scalability and customer environments that they target (general purpose or specialized systems).scalability. Our midsizemid-size and large servers are designed to offer greaterbetter performance and lower total cost of ownership than mainframe systems for business critical applications, and for customers having more computationally intensive needs.needs, and as platforms for building cloud computing IT environments. Our SPARC servers runare also a core component of the Oracle Solaris operating system and are designed for the most demanding mission critical enterprise environments at any scale.SuperCluster, one of our Oracle Engineered Systems.

We also offer enterprise x86 servers. These x86 servers are primarily based on microprocessor platformsmicroprocessors from Intel Corporation and are also compatible with Oracle Solaris, Oracle Linux, Microsoft Windows and other operating systems.

Our Netra line ofx86 servers are aimed atalso a core component of many of our Oracle Engineered Systems including Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In-Memory Machine and 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.Oracle Big Data Appliance.

Our storage products are designed to securely manage, protect, archive and restore customers’ mission critical data assets and consist of tape, disk, flash and hardware-related software including file systems software, back-up and archive software and storage management software and networking for mainframe and open systems environments.

Our networking and data center fabric products, including Oracle Virtual Networking, and Oracle InfiniBand and Ethernet technologies, are used with our server and storage products and are integrated into our management tools to help enterprise customers improve infrastructure performance, reduce cost and complexity and simplify storage and server connectivity.

We offer hardware products and services designed for specific industries. Our point-of-sale hardware offerings include point-of-sale terminals and related hardware that are designed for managing businesses within the food and beverage, hotel and retail industries, among others. Our hardware products and services for communications networks include network signaling, policy control and subscriber data management solutions, and session border control technology, among others.

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 finalmaterials procurement, assembly, testtesting and quality control of our Oracle Engineered Systems and certain of our enterprise and data center servers and storage systems. For all other manufacturing, we generally rely on third party manufacturing partners.partners to produce our hardware related components and hardware products and we may involve our internal manufacturing operations in the final assembly, testing and quality control processes for these components and products. 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 hardware systems operating margins that we report are affected by our strategy for and the competitive position of our hardware systems products, the strength of general economic and business conditions, governmental budgetary constraints, our strategy for and the competitive positioncertain 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 ourOur quarterly hardware systems products revenues.revenues are difficult to predict. The timing of customer orders and delays in our ability to timely manufacture or deliver a few large hardware transactions, among other factors, 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 storagehardware products, such as Oracle Solaris and certain other software products, and can include product repairs, maintenance services and technical support services. Typically, our hardware systems support contract arrangements are priced as a percentage of the net hardware systems products fees, are invoiced to the customer at the beginning of the support period and are one year in duration. We continue to evolve hardware systems support processes that are intended to proactively identify and solve quality issues and to increase the amount of new and renewed hardware systems support contracts sold in connection with the sales of our hardware systems products. Our hardware systems support revenues that we report are influenced by a

number of factors, including the volume of purchases of hardware products, the mix of hardware products purchased, andwhether customers decide to purchase hardware systems support contracts at or in close proximity to the time of hardware product sale, the percentage of our hardware systems support contract customer base that renews its support contracts. Allcontracts and our acquisitions. Substantially 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 certain of 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$4 million, $148$11 million and $128$14 million for fiscal 2012, 20112015, 2014 and 2010,2013, 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 respective support periods.

Services Business

Our services business, which represented 9%, 10% and 11% of our total revenues in fiscal 2015, fiscal 2014 and fiscal 2013, respectively, is comprised of the remainder of our operating segments and offers consulting services, managed cloud services and education services.segments. 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 cloud 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 our strategy for and the competitive position of our services, certain of our acquisitions, general economic conditions, governmental budgetary constraints, personnel reductions in our customers’ IT departments, tighter controls over discretionary spending and the growth in our software and hardware systems products revenues. Our services business’ offerings include:

Our

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

Acquisitions

AnA selective and 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)MICROS Systems, Inc. (MICROS) in fiscal 2012,

2015, Responsys, Inc. (Responsys) and Art Technology Group,Tekelec Global, Inc. (ATG) and Phase Forward Incorporated (Phase Forward)(Tekelec) in fiscal 2011,2014, and Acme Packet, Inc. (Acme Packet) in fiscal 2013, among others. We believe our acquisition program strengthens our competitive position, enhances the products and services that we can offer to customers, expands our customer base, provides greater scale to accelerate innovation, grows our revenues and earnings and increases stockholder value. We expect to continue to acquire companies, products, services and technologies in furtherance of our corporate strategy. Note 2 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report provides additional information related to our recent acquisitions.

We believe we can fund our future acquisitions with our internally available cash, cash equivalents and marketable securities, cash generated from operations, additional borrowings or from the issuance of additional securities. We estimate the financial impact of any potential acquisition with regard to earnings, operating margin, cash flow and return on invested capital targets before deciding to move forward with an acquisition.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (Codification)(ASC) and we consider the various staff accounting bulletins and other applicable guidance issued by the SEC.United States Securities and Exchange Commission (SEC). GAAP, as set forth within the Codification,ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these

estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed the belowour critical accounting policies and related disclosures with the Finance and Audit Committee of the Board of Directors.

Revenue Recognition

Our sources of revenues include: (1) software which includesand cloud revenues, including new software licenselicenses revenues earned from granting licenses to use our software products and industry specific software; cloud SaaS and PaaS revenues generated from fees for granting customers access to a broad range of our software and related support offerings on a subscription basis in a secure, standards-based cloud computing environment; cloud IaaS revenues generated from cloudfees for deployment and management offerings for our software and hardware and related IT infrastructure generally on a subscription offerings,basis; and software license updates and product support revenues;revenues (described further below); (2) hardware systems revenues, which includesinclude the sale of hardware systems products including Oracle Engineered Systems, computer servers, and storage products, networking and data center fabric products, and industry specific hardware; and hardware systems support revenues; and (3) services, which includesinclude software and hardware related services including consulting, managed cloud servicesadvanced customer support and education revenues. RevenueRevenues generally isare recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

Revenue Recognition for Software Products and Software Related Services (Software Elements)

New software licenselicenses revenues primarily represent fees earned from granting customers licenses to use our database, middleware and applicationsapplication software and exclude cloud SaaS and PaaS revenues and revenues derived from software license updates, which are included in software license updates and product support revenues. The basis for our new software licenselicenses revenue recognition is substantially governed by the accounting guidance contained in ASC 985-605,Software-Revenue RecognitionRecognition., we We exercise judgment and use estimates in connection with the determination of the amount of software and software related services revenues to be recognized in each accounting period.

For software license arrangements that do not require significant modification or customization of the underlying software, we recognize new software licenselicenses revenues when: (1) we enter into a legally binding arrangement with a customer for the license of software; (2) we deliver the products; (3) the sale price is fixed or determinable and free of contingencies or significant uncertainties; and (4) collection is probable. Revenues that are not recognized at the time of sale because the foregoing conditions are not met, are recognized when those conditions are subsequently met.

Substantially all of our software license arrangements do not include acceptance provisions. However, if acceptance provisions exist as part of public policy, for example, in agreements with government entities where

acceptance periods are required by law, or within previously executed terms and conditions that are referenced in the current agreement and are short-term in nature, we generally recognize revenues upon delivery provided the acceptance terms are perfunctory and all other revenue recognition criteria have been met. If acceptance provisions are not perfunctory (for example, acceptance provisions that are long-term in nature or are not included as standard terms of an arrangement), revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the acceptance period.

The vast majority of our software license arrangements include software license updates and product support contracts, which are entered into at the customer’s option and are recognized ratably over the term of the arrangement, typically one year. Software license updates provide customers with rights to unspecified software product upgrades, maintenance releases and patches released during the term of the support period. Product support includes internet access to technical content, as well as internet and telephone access to technical support personnel. Software license updates and product support contracts are generally priced as a percentage of the net new software licenselicenses fees. Substantially all of our customers renew their software license updates and product support contracts annually.

Revenue Recognition for Multiple-Element Arrangements—Software Products and Software Related Services (Software Arrangements)

We often enter into arrangements with customers that purchase both software related products and software related services from us at the same time, or within close proximity of one another (referred to as software related multiple-element arrangements). Such software related multiple-element arrangements include the sale of our software products, software license updates and product support contracts and other software related services whereby software license delivery is followed by the subsequent or contemporaneous delivery of the other elements. For those software related multiple-element arrangements, we have applied the residual method to determine the amount of new software license revenues to be recognized pursuant to ASC 985-605. Under the residual method, if fair value exists for undelivered elements in a multiple-element arrangement, such fair value of the undelivered elements is deferred with the remaining portion of the arrangement consideration generally recognized upon delivery of the software license or services arrangement.license. We allocate the fair value of each element of a software related multiple-element arrangement based upon its fair value as determined by our vendor specific objective evidence (VSOE—described further below), with any remaining amount allocated to the software license.

Revenue Recognition for Cloud SaaS, PaaS and IaaS Offerings, Hardware Systems Products, Hardware Systems Support and Related Services and Cloud Software Subscription Offerings (Nonsoftware Elements)

Revenues from the sale of hardware systems products represent amounts earned primarily from the sale of computer servers and storage products. Our revenue recognition policy for these nonsoftware deliverables and

other nonsoftware deliverables including cloud SaaS, PaaS and IaaS offerings, hardware systems products, support and related services and cloud software subscription offerings is based upon the accounting guidance contained in ASC 605,605-25,Revenue Recognition,Multiple-Element Arrangements, and we exercise judgment and use estimates in connection with the determination of the amount of cloud SaaS, PaaS and IaaS revenues, hardware systems products hardware systemsrevenues, support and related services revenues and cloud software subscription revenues to be recognized in each accounting period.

Revenues from the sales of our nonsoftware elements are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the products and passage of the title to the buyer occurs; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured. Revenues that are not recognized at the time of sale because the foregoing conditions are not met are recognized when those conditions are subsequently met. When applicable, we reduce revenues for estimated returns or certain other incentive programs where we have the ability to sufficiently estimate the effects of these items. Where an arrangement is subject to acceptance criteria and the acceptance provisions are not perfunctory (for example, acceptance provisions that are long-term in nature or are not included as standard terms of an arrangement), revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the acceptance period.

Our cloud SaaS and PaaS offerings generally provide customers access to certain of our software within a cloud-based IT environment that we manage, host and support and offer to customers on a subscription basis. Revenues for our cloud SaaS and PaaS offerings are generally recognized ratably over the contract term commencing with the date the service is made available to customers and all other revenue recognition criteria have been satisfied.

Our cloud IaaS offerings provide deployment and management offerings for our software and hardware and related IT infrastructure including comprehensive software and hardware management and maintenance services arrangements for customer IT infrastructure for a stated term that is hosted at our data center facilities, select partner data centers or physically on-premises at customer facilities generally for a term-based fee; and virtual machine instances that are subscription-based and designed for computing and reliable and secure object storage. Revenues for these cloud IaaS offerings are generally recognized ratably over the contract term commencing with the date the service is made available to customers and all other revenue recognition criteria have been satisfied.

Revenues from the sale of hardware systems products represent amounts earned primarily from the sale of our Oracle Engineered Systems, computer servers, storage, networking and industry specific hardware.

Our hardware systems support offerings generally provide customers with software updates for the software components that are essential to the functionality of our server and storagehardware products and can also include product repairs, maintenance services and technical support services. Hardware systems support contracts are generally priced as a percentage of the net hardware systems products fees. Hardware systems support contracts are entered into at the customer’s option and are recognized ratably over the contractual term of the arrangements, which are typically one year.

Our cloud software subscription offerings generally provide customers access to certain of our software within a cloud-based IT environment that we manage and offer to customers on a subscription basis. Revenues for our cloud software subscription offerings are recognized ratably over the contract term commencing with the date our service is made available to customers and all other revenue recognition criteria have been satisfied.

Revenue Recognition for Multiple-Element Arrangements—Arrangements—Cloud SaaS, PaaS and IaaS Offerings, Hardware Systems Products, and Hardware Systems Support and Related Services (Nonsoftware Arrangements)

We enter into arrangements with customers that purchase both nonsoftware related products and services from us at the same time, or within close proximity of one another (referred to as nonsoftware multiple-element arrangements). Each element within a nonsoftware multiple-element arrangement is accounted for as a separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by us. We consider a deliverable to have standalone value if the product or service is sold separately by us or another vendor or could be resold by the customer. Further, our revenue arrangements generally do not include a general right of return relative to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. For those units of accounting that include more than one deliverable but are treated as a single unit of accounting, we generally recognize revenues over the delivery period.contractual period of the arrangement or in the case of our cloud offerings, we generally recognize revenues over the contractual term of the cloud software subscription. For the purposes of revenue classification of the elements that are accounted for as a single unit of accounting, we allocate revenue to the respective revenue line items within our consolidated statements of operations based on a rational and consistent methodology utilizing our best estimate of relative selling prices of such elements.

For our nonsoftware multiple-element arrangements, we allocate revenue to each element based on a selling price hierarchy at the arrangement’s inception. The selling price for each element is based upon the following selling price hierarchy: VSOE if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE are available (a description as to how we determine VSOE, TPE and ESP is provided below). If a tangible hardware systems product includes software, we determine whether the tangible hardware systems product and the software work together to deliver the product’s essential functionality and, if

so, the entire product is treated as a nonsoftware deliverable. The total arrangement consideration is allocated to each separate unit of accounting for each of the nonsoftware deliverables using the relative selling prices of each unit based on the aforementioned selling price hierarchy. We limit the amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting of any specified performance conditions.

When possible, we establish VSOE of selling price for deliverables in software and nonsoftware multiple-element arrangements using the price charged for a deliverable when sold separately and for software license updates and product support and hardware systems support, based on the renewal rates offered to customers. TPE

is established by evaluating similar and interchangeable competitor products or services in standalone arrangements with similarly situated customers. If we are unable to determine the selling price because VSOE or TPE does not exist, we determine ESP for the purposes of allocating the arrangement by reviewing historical transactions, including transactions whereby the deliverable was sold on a standalone basis and considering several other external and internal factors including, but not limited to, pricing practices including discounting, margin objectives, competition, contractually stated prices, the geographies in which we offer our products and services, the type of customer (i.e., distributor, value added reseller, government agency and direct end user, among others) and the stage of the product lifecycle. The determination of ESP is made through consultation with and approval by our management, taking into consideration our pricing model and go-to-market strategy. As our, or our competitors’, pricing and go-to-market strategies evolve, we may modify our pricing practices in the future, which could result in changes to our determination of VSOE, TPE and ESP. As a result, our future revenue recognition for multiple-element arrangements could differ materially from our results in the current period. Selling prices are analyzed on an annual basis or more frequently if we experience significant changes in our selling prices.

Revenue Recognition Policies Applicable to both Software and Nonsoftware Elements

Revenue Recognition for Multiple-Element Arrangements—Arrangements—Arrangements with Software and Nonsoftware Elements

We also enter into multiple-element arrangements that may include a combination of our various software related and nonsoftware related products and services offerings including hardware systems products, hardware systems support, new software licenses, software license updates and product support, cloud software subscription,SaaS, PaaS and IaaS offerings, hardware systems products, hardware systems support, consulting, managed cloudadvanced customer support services and education. In such arrangements, we first allocate the total arrangement consideration based on the relative selling prices of the software group of elements as a whole and to the nonsoftware elements. We then further allocate consideration within the software group to the respective elements within that group following the guidance in ASC 985-605 and our policies as described above. After the arrangement consideration has been allocated to the elements, we account for each respective element in the arrangement as described above.

Other Revenue Recognition Policies Applicable to Software and Nonsoftware Elements

Many of our software arrangements include consulting implementation services sold separately under consulting engagement contracts and are included as a part of our services business. Consulting revenues from these arrangements are generally accounted for separately from new software licenselicenses revenues because the arrangements qualify as services transactions as defined in ASC 985-605. The more significant factors considered in determining whether the revenues should be accounted for separately include the nature of services (i.e., consideration of whether the services are essential to the functionality of the licensed product), degree of risk, availability of services from other vendors, timing of payments and impact of milestones or acceptance criteria on the realizability of the software license fee. Revenues for consulting services are generally recognized as the services are performed. If there is a significant uncertainty about the project completion or receipt of payment for the consulting services, revenues are deferred until the uncertainty is sufficiently resolved. We estimate the proportional performance on contracts with fixed or “not to exceed” fees on a monthly basis utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If we do not have a sufficient basis to measure progress towards completion, revenues are recognized when we receive final acceptance from the customer that the services have been completed. When total cost estimates exceed revenues, we accrue for the estimated losses immediately using cost estimates that are based upon an average fully

burdened daily rate applicable to the consulting organization delivering the services. The complexity of the estimation process and factors relating to the assumptions, risks and uncertainties inherent with the application of the proportional performance method of accounting affects the amounts of revenues and related expenses reported in our consolidated financial statements. A number of internal and external factors can affect our estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes.

Our managed cloudadvanced customer support services are offered as standalone arrangements or as a part of arrangements to customers buying newother software licenses or hardware systemsand non-software products and services. Oracle managed cloud services are designed to provide comprehensive software and hardware management and maintenance services for customers hosted at our Oracle data center facilities, select partner data centers or physically on-premise at customer facilities. Additionally, we provideWe offer these advanced support

services, both on-premiseon-premises and remote, to Oracle customers to enable increased performance and higher availability of their products and services. Depending upon the nature of the arrangement, revenues from managed cloudthese services are recognized as the services are performed or ratably over the term of the service period, which is generally one year or less.

Education revenues are also a part of our services business and include instructor-led, media-based and internet-based training in the use of our software and hardware products. Education revenues are recognized as the classes or other education offerings are delivered.

If an arrangement contains multiple elements and does not qualify for separate accounting for the product and service transactions, then new software licenselicenses revenues and/or hardware systems products revenues, including the costs of hardware systems products, are generally recognized together with the services based on contract accounting using either the percentage-of-completion or completed-contract method. Contract accounting is applied to any bundled software and cloud, hardware systems and services arrangements: (1) that include milestones or customer specific acceptance criteria that may affect collection of the software license or hardware systems product fees; (2) where consulting services include significant modification or customization of the software or hardware systems product or are of a specialized nature and generally performed only by Oracle; (3) where significant consulting services are provided for in the software license contract or hardware systems product contract without additional charge or are substantially discounted; or (4) where the software license or hardware systems product payment is tied to the performance of consulting services. For the purposes of revenue classification of the elements that are accounted for as a single unit of accounting, we allocate revenues to software and nonsoftware elements based on a rational and consistent methodology utilizing our best estimate of the relative selling price of such elements.

We also evaluate arrangements with governmental entities containing “fiscal funding” or “termination for convenience” provisions, when such provisions are required by law, to determine the probability of possible cancellation. We consider multiple factors, including the history with the customer in similar transactions, the “essential use” of the software or hardware systems products and the planning, budgeting and approval processes undertaken by the governmental entity. If we determine upon execution of these arrangements that the likelihood of cancellation is remote, we then recognize revenues once all of the criteria described above have been met. If such a determination cannot be made, revenues are recognized upon the earlier of cash receipt or approval of the applicable funding provision by the governmental entity.

We assess whether fees are fixed or determinable at the time of sale and recognize revenues if all other revenue recognition requirements are met. Our standard payment terms are net 30 days. However, payment terms may vary based on the country in which the agreement is executed. Payments that are due within six months are generally deemed to be fixed or determinable based on our successful collection history on such arrangements, and thereby satisfy the required criteria for revenue recognition.

While most of our arrangements for sales within our businesses include short-term payment terms, we have a standard practice of providing long-term financing to creditworthy customers primarily through our financing division. Since fiscal 1989, when our financing division was formed, we have established a history of collection, without concessions, on these receivables with payment terms that generally extend up to five years from the contract date. Provided all other revenue recognition criteria have been met, we recognize new software licenselicenses revenues and hardware systems products revenues for these arrangements upon delivery, net of any payment discounts

from financing transactions. We have generally sold receivables financed through our financing division on a non-recourse basis to third party financing institutions within 90 days of the contracts’ dates of execution and we classify the proceeds from these sales as cash flows from operating activities in our consolidated statements of cash flows. We account for the sales of these receivables as “true sales” as defined in ASC 860,Transfers and Servicing, as we are considered to have surrendered control of these financing receivables.

In addition, we enter into arrangements with leasing companies for the sale of our hardware systems products. These leasing companies, in turn, lease our products to end-users. The leasing companies generally have no recourse to us in the event of default by the end-user and we recognize revenue upon delivery, if all the other revenue recognition criteria have been met.

Our customers include several of our suppliers and, occasionally, we have purchased goods or services for our operations from these vendors at or about the same time that we have sold our products to these same companies (Concurrent Transactions). Software license agreements or sales of hardware systems that occur within a three-month time period from the date we have purchased goods or services from that same customer are reviewed for appropriate accounting treatment and disclosure. When we acquire goods or services from a customer, we negotiate the purchase separately from any sales transaction, at terms we consider to be at arm’s length and settle the purchase in cash. We recognize new software license revenues or hardware systems product revenues from Concurrent Transactions if all of our revenue recognition criteria are met and the goods and services acquired are necessary for our current operations.

Business Combinations

We apply the provisions of ASC 805,Business Combinations, in the accounting for our acquisitions. It requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at theirthe acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred andover the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, including our estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not limited to:

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

We estimate the fair values of our cloud SaaS and PaaS (collectively, cloud software subscription,subscriptions), software license updates and product support, and hardware systems support obligations assumed. The estimated fair values of these performance obligations are determined utilizing a cost build-up approach. The cost build-up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. The estimated costs to fulfill the obligations are based on the historical direct costs related to providing the services including the correction of any errors in the products acquired. The sum of these costs and operating profit approximates, in theory, the amount that we would be required to pay a third party to assume the performance obligations. We do not include any costs associated with selling efforts or research and development or the related fulfillment margins on these costs. Profit associated with any selling efforts is excluded because the

acquired entities would have concluded those selling efforts on the performance obligations prior to the acquisition date. We also do not include the estimated research and development costs in our fair value determinations, as these costs are not deemed to represent a legal obligation at the time of acquisition. As a result, we did not recognize new software licensescloud SaaS and PaaS revenues related to cloud software subscriptionSaaS and PaaS contracts in the amountamounts of $22$12 million, $17 million and $45 million that would have been otherwise recorded by the acquired businesses as independent entities in fiscal 2012.2015, 2014 and 2013, respectively. We did not recognize software license updates and product support revenues related to support contracts in the amounts of $48$11 million, $80$3 million and $86$14 million that would have been otherwise recorded by the acquired businesses as independent entities in fiscal 2012, 20112015, 2014 and 2010,2013, respectively. In addition, we did not recognize hardware systems support revenues related to hardware systems support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amounts of $30$4 million, $148$11 million and $128$14 million for fiscal 2012, 20112015, 2014 and 2010,2013, respectively. Historically, substantially all of our customers, including customers from acquired companies, renew their software license updates and product support contracts when the contracts are eligible for renewal and we strive to renew cloud software subscriptionSaaS and PaaS, and hardware systems support contracts. To the extent cloud software subscription,SaaS and PaaS, software support or hardware systems support contracts are renewed, we will recognize the revenues for the full values of the contracts over the contracts’their respective contractual periods, which are generally one year in duration.

In connection with a business combination or other strategic initiative, we may estimate costs associated with restructuring plans committed to by our management. Restructuring costs are typically comprised of employee severance costs, costs of consolidating duplicate facilities and contract termination costs. Restructuring expenses are based upon plans that have been committed to by our management, but may be refined in subsequent periods. We account for costs to exit or restructure certain activities of an acquired company separately from the business combination. These costs are accounted for as one-time termination and exit costscombination pursuant to ASC 420,Exit or Disposal Cost ObligationsObligations.. A liability for a costcosts associated with an exit or disposal activity is recognized and measured at its fair value in our consolidated statement of operations in the period in which the liability is incurred. When estimating the fair value of facility restructuring activities, assumptions are applied regarding estimated sub-lease payments to be received, which can differ materially from actual results. This may require us to revise our initial estimates which may materially affect our results of operations and financial position in the period the revision is made.

For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend our review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether we include these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts.

If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, which is generally the case given the nature of such matters, we will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Subsequent to the measurement period, changes in our estimates of such contingencies will affect earnings and could have a material effect on our results of operations and financial position.

In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. We reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to our preliminary estimates being recorded to goodwill provided that we areif identified within the measurement period. Subsequent to the measurement period or our final determination of the tax allowance’s or contingency’s estimated value, whichever comes first,

changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in our consolidated statement of operations and could have a material impact on our results of operations and financial position.

Goodwill and Intangible Assets—Assets—Impairment Assessments

We review goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with ASC 350,Intangibles—Goodwill and Other. Effective fiscal 2012,According to ASC 350, we optedcan opt to perform a qualitative assessment to test a reporting unit’s goodwill for impairment.

impairment or we can directly perform the two step impairment test. Based on our qualitative assessment, if we determine that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, the two step impairment test prescribed by ASC 350 will be performed. In the first step, we compare the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. Our reporting units are consistent with our operating segments identified in Note 16 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.

Based upon our most recent annual goodwill impairment review which took place as of March 1, 2015, we recorded a goodwill impairment loss related to our hardware systems products reporting unit. We considered several approaches to determine the fair value of our hardware systems reporting unit and concluded the most appropriate to be the income approach. Based upon the completion of our annual forecasting process, the fair value of our hardware systems products reporting unit under the income approach was impacted by lower forecasted operating results, primarily caused by lower forecasted revenues and our continued investment in research and development activities. We compared the implied fair value of goodwill in our hardware systems products reporting unit to its carrying value, which resulted in a $186 million goodwill impairment loss, representing the aggregate amount of goodwill in our hardware systems products reporting unit. The aggregate hardware systems reporting unit goodwill that was impaired in fiscal 2015 resulted from our acquisitions of Pillar Data Systems, Inc., Xsigo Systems, Inc., GreenBytes, Inc. and MICROS Systems, Inc. Such impairment loss was recorded to acquisition related and other expenses in our fiscal 2015 consolidated statement of operations. We did not recognize any goodwill impairment losses in fiscal 2014 or 2013.

Our most recent annual goodwill impairment analysis,review for our other reporting units, which was performed during the fourth quarter of fiscal 2012,also took place on March 1, 2015, did not result in a goodwill impairment charge, nor did we record anyloss. Other than our consulting reporting unit, all of our other reporting units had fair values that substantially exceeded their carrying values. Our consulting reporting unit had $1.8 billion of goodwill on March 1, 2015, and experienced revenue and operating margin declines in fiscal 2015. As of our most recent annual goodwill impairment review, our consulting reporting unit’s fair value was 16% in fiscal 2011excess of its carrying value. We estimate that should our consulting reporting unit’s projected margins and related cash flows unfavorably deviate from our projections by 20% or 2010.more, our consulting reporting unit likely would incur a goodwill impairment loss.

We make judgments about the recoverability of purchased finite lived intangible assets whenever events or changes in circumstances indicate that an impairment may exist. Each period we evaluate the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Recoverability of finite lived intangible assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. We review indefinite lived intangible assets for impairment annually and whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability of indefinite lived intangible assets is measured by comparison of the carrying amount of the asset to its fair value. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends and internal factors such as changes in our business strategy and our internal

forecasts. Although we believe the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. We did not recognize any intangible asset impairment charges in fiscal 2012, 20112015, 2014 or 2010.2013.

Accounting for Income Taxes

Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities, the process of identifying items of revenues and expenses that qualify for preferential tax treatment and segregation of foreign and domestic earnings and expenses to avoid double taxation. Although we

believe that our estimates are reasonable, the final tax outcome of these matters could be different from that which is reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and net income in the period in which such determination is made.

Our effective tax rate includes the impact of certain undistributed foreign earnings for which no U.S. taxes have been provided because such earnings are planned to be indefinitely reinvested outside the United States. Remittances of foreign earnings to the United States are planned based on projected cash flow, working capital and investment needs of our foreign and domestic operations. Based on these assumptions, we estimate the amount that will be distributed to the United States and provide U.S. federal taxes on these amounts. Material changes in our estimates as to how much of our foreign earnings will be distributed to the United States or tax legislation that limits or restricts the amount of undistributed foreign earnings that we consider indefinitely reinvested outside the United States could materially impact our income tax provision and effective tax rate.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income in those jurisdictions where the deferred tax assets are located. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carryback is permitted under the law and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to earnings at such time.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the period when the tax returns are filed and the global tax implications are known, which can materially impact our effective tax rate.

The amount of income tax we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. A description of our accounting policies associated with tax related contingencies assumed as a part of a business combination is provided under “Business Combinations” above. For those tax related contingencies that are not a part of a business combination, we account for these uncertain tax issues pursuant to ASC 740,Income Taxes, which contains a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained onin an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given with respect to the final outcome of these matters. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, and refinement of estimates or realization of earnings or deductions that differ from

our estimates. To the extent that the final outcome of these matters is different than the amounts recorded, such differences generally will impact our provision for income taxes in the period in which such a determination is made. Our provisions for income taxes include the impact of reserve provisions and changes to reserves that are considered appropriate and also include the related interest and penalties.

In addition, as a part of our accounting for business combinations, intangible assets are recognized at fair values and goodwill is measured as the excess of consideration transferred over the net estimated fair values of assets acquired. Impairment charges associated with goodwill are generally not tax deductible and will result in an increased effective income tax rate in the period that any impairment is recorded. Amortization expenses associated with acquired intangible assets are generally not tax deductible pursuant to our existing tax structure; however, deferred taxes have been recorded for non-deductible amortization expenses as a part of the accounting for business combinations. We have taken into account the allocation of these identified intangibles among different taxing jurisdictions, including those with nominal or zero percent tax rates, in establishing the related deferred tax liabilities.

Legal and Other Contingencies

We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each significant matter and assess our potential financial exposure. A description of our accounting policies associated with contingencies assumed as a part of a business combination is provided under “Business Combinations” above. For legal and other contingencies that are not a part of a business combination, we accrue a liability for an estimated loss if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time the accruals are made. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position.

Stock-Based Compensation

We account for share-based payments to employees, including grants of service-based employee stock options, service-based restricted stock-basedstock awards, performance-based restricted stock awards (PSUs) and purchases under employee stock purchase plans, in accordance with ASC 718,Compensation—Stock Compensation, which requires that share-based payments (to the extent they are compensatory) be recognized in our consolidated statements of operations based on their fair values. Wevalues and the estimated number of shares we ultimately expect will vest. For our service-based awards, we recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally four years. For our PSUs, we recognize stock-based compensation expense on a straight-line basis over the service period for each separately vesting tranche, as the performance conditions to evaluate attainment of each tranche for each participant are independent of the performance conditions for the other tranches.

We are required to estimate the stock awards that we ultimately expect to vest and to reduce stock-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. Although we estimate the rate of future forfeitures based upon historical experience, actual forfeitures in the future may differ. To the extent our actual forfeitures are different than our estimates, we record a true-up for the difference in the period that a grantee terminates or the awards vest and such true-ups could materially affect our operating results. Additionally, we also consider on a quarterly basis whether there have been any significant changes in facts and circumstances that would affect our expected forfeiture rate.

We estimate the fair values of employee stock options using a Black-Scholes-Merton valuation model. The fair value of an award is affected by our stock price on the date of grant as well as other assumptions including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their stock options. The risk-free interest rate assumption we use is based upon United StatesU.S. treasury interest rates appropriate for the expected life of the awards. We use the implied volatility of our publicly traded

options in our stock in order to estimate future stock price trends as we believe that implied volatility is more representative of future stock price trends than historical volatility. In order to determine the estimated period of time that we expect employees to hold their stock options, we have used historical rates of employee groups by seniority of job classification. Our expected dividend rate is based upon an annualized dividend yield based on the per share dividend declared by our Board of Directors. The aforementioned inputs entered into the option valuation model we use to fair value our stock awards are subjective estimates and changes to these estimates will cause the fair values of our stock awards and related stock-based compensation expense that we record to vary.

We issue PSUs to certain key executives. We estimate the fair values of the PSUs based upon their intrinsic values as of the grant dates as the vesting conditions and related terms of the PSUs were communicated to each participating employee as of their respective grant dates and include attainment metrics that are defined, fixed and consistently determined based upon consistent U.S. GAAP metrics or internal metrics and that require the employee to render service. The performance conditions of the PSUs affect the number of PSUs that will ultimately vest and be issued to the grantee based upon a “target” that is subject to certain attainment maximums, with the possibility that none will vest if applicable performance conditions are not met. We update the amount of stock-based compensation expense, net of forfeitures, to record as of the end of each reporting period based on the expected attainment of performance targets, which is subject to change until a final determination is known. Changes to the target estimates are reflected in the amount of stock-based compensation expense that we recognize for each PSU tranche on a cumulative basis during the reporting period in which the target estimates are altered and may cause the amount of stock-based compensation expense that we record for such reporting period to vary.

We record deferred tax assets for stock-based compensation awards that result in deductions on our income tax returns, based on the amount of stock-based compensation recognized and the fair values attributable to the vested portion of stock awards assumed in connection with a business combination, at the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Because the deferred tax assets we record are based upon the stock-based compensation expenses in a particular jurisdiction, the aforementioned inputs that affect the fair values of our stock awards may also indirectly affect our income tax expense. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, the calculated shortfall reduces our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense.

To the extent we change the terms of our employee stock-based compensation programs, experience market volatility in the pricing of our common stock that increases the implied volatility calculation of our publicly traded options in our stock, refine different assumptions in future periods such as forfeiture rates or PSU target performance attainment that differ from our current estimates, or assume stock awards from acquired companies that are different in nature than our stock award arrangements, among other potential impacts, the stock-based compensation expense that we record in future periods and the tax benefits that we realize may differ significantly from what we have recorded in previous reporting periods.

Allowances for Doubtful Accounts

We make judgments as to our ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided at differing rates, based upon the age of the receivable, the collection history associated with the geographic region that the receivable was recorded and current economic trends. If the historical data that we use to calculate the allowances for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and our future results of operations could be materially affected.

Results of Operations

Impact of Acquisitions

The comparability of our operating results in fiscal 20122015 compared to fiscal 2011 is2014 was impacted by our acquisitions, primarily the acquisitionour acquisitions of TaleoMICROS in the fourthsecond quarter of fiscal 2012, RightNow2015 and Responsys in the third quarter of fiscal 2012, ATG in the third quarter of fiscal 2011 and Phase Forward during the first quarter of fiscal 2011.2014.

The comparability of our operating results in fiscal 20112014 compared to fiscal 2010 is2013 was impacted by our acquisitions, primarily the acquisitionour acquisitions of SunResponsys in the third quarter of fiscal 2010 and, to a lesser extent, our acquisitions of ATG2014, Tekelec in the third quarter of fiscal 2011 and Phase Forward during the first quarter of fiscal 2011.2014 and Acme Packet in the fourth quarter of fiscal 2013.

In our discussion of changes in our results of operations from fiscal 20122015 compared to fiscal 20112014 and fiscal 20112014 compared to fiscal 2010,2013, we quantifymay qualitatively disclose the contributionsimpact of our acquired products to the growth in new software license revenues, software license updates and product support revenues, hardware systems products revenues (as applicable) and hardware systems support revenues (as applicable) forservices (for the one year period subsequent to the acquisition date. Wedate) to the growth in certain of our operating segments’ revenues where such qualitative discussions would be meaningful for an understanding of the factors that influenced the changes in our results of operations. When material, we may also are ableprovide quantitative disclosures related to quantify the total incremental expenses associated with our hardware systemssuch

acquired products and hardware systems support operating segments for fiscal 2011 in comparison to fiscal 2010.services. The incremental contributions of our acquisitions to certain of our other businesses and operating segments’ revenues, margins and expenses for each of the respective period comparisons generally are not provided in our discussions, as they either were not separately identifiable due to the integration of these businesses and operating segments into our existing operations, and/or were insignificant to our results of operations during the periods presented.

We caution readers that, while pre- and post-acquisition comparisons, as well as theany quantified amounts themselves, may provide indications of general trends, theany acquisition information that we provide has inherent limitations for the following reasons:

Constant Currency Presentation

Our international operations have provided and will continue to provide a significant portion of our total revenues and expenses. As a result, total revenues and expenses will continue to be affected by changes in the U.S. Dollar against major international currencies. In order to provide a framework for assessing how our underlying businesses performed excluding the effecteffects of foreign currency fluctuations, we compare the percent change in the results from one period to another period in this Annual Report using constant currency disclosure. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at constant exchange rates (i.e., the rates in effect on May 31, 2011,2014, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods. For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on May 31, 20122015 and May 31, 2011,2014, our financial statements would reflect reported revenues of $1.25$1.08 million in fiscal 20122015 (using 1.251.08 as the month-end average exchange rate for the period) and $1.41$1.36 million in fiscal 20112014 (using 1.411.36 as the month-end average exchange rate for the period). The constant currency presentation, however, would translate the fiscal 20122015 results using the fiscal 20112014 exchange rate and indicate, in this example, no change in revenues during the period. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.

Total Revenues and Operating Expenses