Oracle (ORCL) 10-Q 22 Dec 09 2010 Q2 Quarterly report Financial data

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Nov. 30, 2009	May. 31, 2009
Current assets:
Cash and cash equivalents	$14,919	$8,995
Marketable securities	5,865	3,629
Trade receivables, net of allowances of $265 and $270 as of November 30, 2009 and May 31, 2009	3,086	4,430
Deferred tax assets	703	661
Prepaid expenses and other current assets	662	866
Total current assets	25,235	18,581
Non-current assets:
Property, net	1,956	1,922
Intangible assets: software support agreements and related relationships, net	3,176	3,411
Intangible assets: other, net	3,408	3,858
Goodwill	19,098	18,842
Other assets	960	802
Total non-current assets	28,598	28,835
Total assets	53,833	47,416
Current liabilities:
Notes payable, current and other current borrowings	1,001	1,001
Accounts payable	255	271
Accrued compensation and related benefits	1,129	1,409
Deferred revenues	4,395	4,592
Other current liabilities	1,754	1,876
Total current liabilities	8,534	9,149
Non-current liabilities:
Notes payable and other non-current borrowings	13,751	9,237
Income taxes payable	2,592	2,423
Deferred tax liabilities	351	480
Other non-current liabilities	690	682
Total non-current liabilities	17,384	12,822
Oracle Corporation stockholders' equity:
Preferred stock, $0.01 par value-authorized: 1.0 shares; outstanding: none	0	0
Common stock, $0.01 par value and additional paid in capital-authorized: 11,000 shares; outstanding: 5,009 shares as of November 30, 2009 and 5,005 shares as of May 31, 2009	13,529	12,980
Retained earnings	13,541	11,894
Accumulated other comprehensive income	461	216
Total Oracle Corporation stockholders' equity	27,531	25,090
Noncontrolling interests	384	355
Total equity	27,915	25,445
Total liabilities and equity	$53,833	$47,416

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets Parenthetical (Unaudited) (USD $)
In Millions, except Per Share data	Nov. 30, 2009	May. 31, 2009
Allowance for doubtful accounts receivable	$265	$270
Preferred stock par or stated value per share	0.01	0.01
Preferred stock shares authorized	1	1
Preferred stock shares outstanding	0	0
Common stock par or stated value per share	0.01	0.01
Common stock shares authorized	11,000	11,000
Common stock shares outstanding	5,009	5,005

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Nov. 30, 2009	3 Months Ended Nov. 30, 2008	6 Months Ended Nov. 30, 2009	6 Months Ended Nov. 30, 2008
Revenues:
New software licenses	$1,653	$1,626	$2,681	$2,863
Software license updates and product support revenue	3,247	2,850	6,364	5,785
Software revenues	4,900	4,476	9,045	8,648
Services	958	1,131	1,866	2,290
Total revenues	5,858	5,607	10,911	10,938
Operating Expenses:
Sales and marketing	1,133	1,146	2,093	2,258
Software license updates and product support costs	264	257	490	539
Cost of services	832	939	1,614	1,965
Research and development	708	651	1,368	1,360
General and administrative	183	174	383	379
Amortization of intangible assets	436	427	867	839
Acquisition related and other	10	21	16	71
Restructuring	114	17	162	31
Total operating expenses	3,680	3,632	6,993	7,442
Operating income	2,178	1,975	3,918	3,496
Interest expense	(188)	(157)	(368)	(317)
Non-operating income, net	33	8	35	90
Income before provision for income taxes	2,023	1,826	3,585	3,269
Provision for income taxes	565	530	1,003	896
Net income	$1,458	$1,296	$2,582	$2,373
Earnings per share:
Earnings per share, basic	0.29	0.25	0.52	0.46
Earnings per share, diluted	0.29	0.25	0.51	0.46
Weighted average common shares outstanding:
Weighted average common shares outstanding, basic	5,010	5,127	5,010	5,140
Weighted average common shares outstanding, diluted	5,064	5,187	5,063	5,211
Dividends declared per common share	0.05	$0	0.1	$0

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	6 Months Ended Nov. 30, 2009	6 Months Ended Nov. 30, 2008
Cash Flows From Operating Activities:
Net income	$2,582	$2,373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	123	134
Amortization of intangible assets	867	839
Deferred income taxes	(216)	(151)
Stock-based compensation	188	186
Tax benefits on the exercise of stock options	71	121
Excess tax benefits on the exercise of stock options, operating activities	(42)	(79)
Other, net	56	39
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net	1,437	1,642
Decrease in prepaid expenses and other assets	235	388
Decrease in accounts payable and other liabilities	(523)	(1,022)
Increase (decrease) in income taxes payable	59	(273)
Decrease in deferred revenues	(448)	(207)
Net cash provided by operating activities	4,389	3,990
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments	(6,185)	(5,105)
Proceeds from maturities and sales of marketable securities and other investments	4,088	4,362
Acquisitions, net of cash acquired	(392)	(1,065)
Capital expenditures	(100)	(399)
Net cash used for investing activities	(2,589)	(2,207)
Cash Flows From Financing Activities:
Payments for repurchases of common stock	(496)	(2,344)
Proceeds from issuances of common stock	371	371
Payment of dividends to stockholders	(501)	0
Proceeds from borrowings, net of issuance costs	4,461	0
Repayments of borrowings	0	(4)
Excess tax benefits on the exercise of stock options, financing activities	42	79
Distributions to noncontrolling interests	(34)	(30)
Net cash provided by (used for) financing activities	3,843	(1,928)
Effect of exchange rate changes on cash and cash equivalents	281	(764)
Net increase (decrease) in cash and cash equivalents	5,924	(909)
Cash and cash equivalents at beginning of period	8,995	8,262
Cash and cash equivalents at end of period	14,919	7,353
Non-cash investing and financing transactions:
Fair value of stock awards assumed in connection with acquisitions	1	1
(Decrease) increase in unsettled repurchases of common stock	($4)	$152

Notes to Condensed Consolidated

Notes to Condensed Consolidated Financial Statements (Unaudited)
	3 Months Ended Nov. 30, 2009 USD / shares
Notes to Condensed Consolidated Financial Statements [Abstract]
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS	1. BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS Basis of Presentation We have prepared the condensed consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May31, 2009. We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for our fiscal year ending May31, 2010. In July 2009, the Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Codification (Codification), which we adopted in our second quarter of fiscal 2010. There were no changes to our consolidated financial statements and related disclosures contained in this Quarterly Report due to our adoption and implementation of the Codification, other than changes in reference in this Quarterly Report to the various authoritative accounting pronouncements contained within the Codification. During fiscal 2010, we adopted certain new accounting pronouncements that affected our significant accounting policies, including FASB Accounting Standards Codification (ASC) 805, Business Combinations. We disclosed our accounting policies for these new accounting pronouncements and all of our other significant accounting policies in Note 1 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended May31, 2009. There have been no other significant changes to our significant accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended May31, 2009 other than the aforementioned reference changes resulting from the Codification. As a result of our adoption of the FASB's new accounting guidance for noncontrolling interests as contained in ASC 810, Consolidation, as of the beginning of fiscal 2010, we retrospectively classified noncontrolling interest positions of certain of our consolidated entities as a separate component of consolidated equity from the equity attributable to Oracle's stockholders for all periods presented. The noncontrolling interests in our net income were not significant to our consolidated results for the periods presented and therefore have been included as a component of non-operating income, net in our condensed consolidated statements of operations. Certain other prior year
ACQUISITIONS	2. ACQUISITIONS Proposed Acquisition of Sun Microsystems, Inc. On April19, 2009, we entered into an Agreement and Plan of Merger (Merger Agreement) with Sun Microsystems, Inc. (Sun), a provider of enterprise computing systems, software and services. Pursuant to the Merger Agreement, our wholly owned subsidiary will merge with and into Sun and Sun will become a wholly owned subsidiary of Oracle. Upon the consummation of the merger, each share of Sun common stock will be converted into the right to receive $9.50 in cash. In addition, options to acquire Sun common stock, Sun restricted stock unit awards and other equity-based awards denominated in shares of Sun common stock outstanding immediately prior to the consummation of the merger will generally be converted into options, restricted stock unit awards or other equity-based awards, as the case may be, denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement.The estimated total purchase price of Sun is approximately $7.4billion. The Merger Agreement contains certain termination rights for both Sun and Oracle and further provides that, upon termination of the Merger Agreement under certain circumstances, Sun may be obligated to pay Oracle a termination fee of $260million. Completion of this transaction is subject to customary closing conditions, including regulatory clearance under the applicable antitrust laws of the European Commission and other jurisdictions. On November9, 2009, we received a Statement of Objections from the European Commission relating to our proposed acquisition of Sun. A hearing to consider the Statement of Objections and Oracle's response to the Statement of Objections was held on December10-11, 2009. Fiscal 2010 Acquisitions During the first six months of fiscal 2010, we acquired several companies and purchased certain technology and development assets to expand our product offerings. These acquisitions were not significant individually or in the aggregate. We have accounted for these acquisitions in accordance with the FASB's revised accounting standard for business combinations, which we adopted as of the beginning of fiscal 2010. We have included the financial results of these companies in our consolidated results from their respective acquisition dates. The preliminary purchase price allocations for each of these acquisitions were based upon a preliminary valuation and our estimates and assumptions for certain of these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods. The primary areas of those purchase price allocations that are not yet finalized relate to identifiable intangible assets, certain legal matters, income and non-income based taxes and residual goodwill. Fiscal 2009 Acquisitions During fiscal 2009, we acquired several companies and purchased certain technology and development assets to expand our product offerings. These acquisitions were not individually significant. We have included the financial results of these companies in our consolidated results from their respective acquisition dates. In the a
FAIR VALUE MEASUREMENTS	3. FAIR VALUE MEASUREMENTS We perform fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset's or liability's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1:quoted prices in active markets for identical assets or liabilities; Level 2:inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or Level 3:unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and Liabilities Measured at Fair Value on a Recurring Basis Our assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, consisted of the following types of instruments (Level 1 and 2 inputs are defined above): November30, 2009 May31, 2009 FairValueMeasurements Using Input Types FairValueMeasurements Using Input Types (in millions) Level1 Level2 Total Level1 Level2 Total Assets: Money market funds $ 1,597 $ $ 1,597 $ 467 $ $ 467 U.S. Treasury, U.S. government and U.S. government agency debt securities 4,852 4,852 4,078 4,078 Commercial paper debt securities 4,335 4,335 1,365 1,365 Corporate debt securities and other 2,442 2,442 1,335 1,335 Derivative financial instruments 27 27 Total assets $ 6,449 $ 6,804 $ 13,253 $ 4,545 $ 2,700 $ 7,245 Liabilities: Derivative financial instruments $ $ 19 $ 19 $ $ 35 $ 35 Total liabilities $ $ 19 $ 19 $ $ 35 $ 35 Our valuation techniques used to measure the fair values of our money market funds and U.S. Treasury, U.S. government and U.S. government agency debt securities were deriv
INTANGIBLE ASSETS AND GOODWILL	4. INTANGIBLE ASSETS AND GOODWILL The changes in intangible assets for fiscal 2010 and the gross and net book value of intangible assets at November30, 2009 and May31, 2009 were as follows: Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net Weighted Average Useful Life (Dollars in millions) May31, 2009 Additions November30, 2009 May31, 2009 Expense November30, 2009 May31, 2009 November30, 2009 Software support agreements and related relationships $ 5,012 $ 45 $ 5,057 $ (1,601 ) $ (280 ) $ (1,881 ) $ 3,411 $ 3,176 9years Developed technology 3,844 87 3,931 (1,925 ) (360 ) (2,285 ) 1,919 1,646 5 years Core technology 1,502 32 1,534 (687 ) (130 ) (817 ) 815 717 6 years Customer relationships 1,284 14 1,298 (320 ) (78 ) (398 ) 964 900 8 years Trademarks 273 4 277 (113 ) (19 ) (132 ) 160 145 7 years Total $ 11,915 $ 182 $ 12,097 $ (4,646 ) $ (867 ) $ (5,513 ) $ 7,269 $ 6,584 Total amortization expense related to our intangible assets was $436 million and $867 million for the three and six months ended November30, 2009, respectively and $427 million and $839 million for the three and six months ended November30, 2008, respectively. Estimated future amortization expense related to our intangible assets was $796 million for the remainder of fiscal 2010, $1.4 billion in fiscal 2011, $1.3 billion in fiscal 2012, $1.1 billion in fiscal 2013, $900 million in fiscal 2014, $706 million in fiscal 2015 and $381 million thereafter. The changes in the carrying amounts of goodwill, which is generally not deductible for tax purposes, for our software business operating segments and for our services business for the six months ended November30, 2009 were as follows: (in millions) New Software Licenses Software License Updatesand Product Support Services Total Balances as of May31, 2009 $ 5,716 $ 11,334 $ 1,792 $ 18,842 Goodwill from acquisitions 163 111 2 276 Goodwill adjustments for acquisitions consummated prior to fiscal 2010(1) (7 ) (12 ) (1 ) (20 ) Balances as of November30, 2009 $ 5,872 $ 11,433 $ 1,793 $ 19,098 (1) Pursuant to our business combinations accounting policy, we record goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement or purchase price allocation period (either of which can be up to one year from the date of an acquisition).
NOTES PAYABLE AND OTHER BORROWINGS	5. NOTES PAYABLE AND OTHER BORROWINGS In July 2009, we issued $4.5 billion of fixed rate senior notes comprised of $1.5 billion of 3.75% notes due July 2014 (2014 Notes), $1.75 billion of 5.00% notes due July 2019 (2019 Notes) and $1.25 billion of 6.125% notes due July 2039 (2039 Notes and, together with 2014 Notes and 2019 Notes, the Senior Notes). We issued the Senior Notes for general corporate purposes and future acquisitions, including our proposed acquisition of Sun and acquisition related expenses. The effective interest yields of the 2014 Notes, 2019 Notes and 2039 Notes at November30, 2009 were 3.75%, 5.06% and 6.19%, respectively. In September 2009, we entered into interest rate swap agreements that have the economic effect of modifying the fixed interest obligations associated with the 2014 Notes so that the interest payable on these notes effectively became variable (1.38% at November30, 2009; see Note 8 for additional information). The Senior Notes rank pari passu with any commercial paper notes that we may issue pursuant to our commercial paper program (see Note 7 of Notes to Consolidated Financial Statements included in our fiscal 2009 Annual Report on Form 10-K for further information on our commercial paper program) and all existing and future senior indebtedness of Oracle Corporation. All existing and future liabilities of the subsidiaries of Oracle Corporation will be effectively senior to the Senior Notes. We were in compliance with all debt-related covenants at November30, 2009. Future principal payments of our borrowings at November30, 2009 were as follows: $1.0 billion in fiscal 2010, $2.25 billion in fiscal 2011, none in fiscal 2012, $1.25 billion in fiscal 2013, none in fiscal 2014 and $10.25 billion thereafter. There have been no other significant changes in our notes payable and other borrowing arrangements that were disclosed in our Annual Report on Form 10-K for the fiscal year ended May31, 2009.
RESTRUCTURING ACTIVITIES	6. RESTRUCTURING ACTIVITIES Fiscal 2009 Oracle Restructuring Plan During the third quarter of fiscal 2009, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our Oracle-based operations (the 2009 Plan). Our management amended the 2009 Plan in the second quarter of fiscal 2010 to reflect additional actions that we expect to take over the course of fiscal 2010. The total estimated restructuring costs associated with the 2009 Plan are $453 million and will be recorded to the restructuring expense line item within our consolidated statements of operations as they are recognized. In the first half of fiscal 2010, we recorded $162 million of restructuring expenses in connection with the 2009 Plan, the majority of which were incurred in the second quarter of fiscal 2010. We expect to incur the majority of the approximately $206 million that is remaining during the last two quarters of fiscal 2010. Any changes to the estimates of executing the 2009 Plan will be reflected in our future results of operations. Acquisition Related Restructuring Plans Adopted Prior to Fiscal 2010 During the fourth quarter of fiscal 2008 and third quarter of fiscal 2006, our management approved, committed to and initiated plans to restructure certain pre-acquisition operations of BEA Systems, Inc. (BEA Restructuring Plan) and Siebel Systems, Inc. (Siebel Restructuring Plan), respectively. Our management initiated these plans in connection with our acquisitions of these companies in order to improve the cost efficiencies in our operations. These plans were initiated and approved prior to our adoption of the revised business combinations accounting guidance contained in ASC 805 as of the beginning of fiscal 2010. Costs related to these restructuring plans were originally recognized as liabilities assumed in each of the respective business combinations and included in the allocation of the cost to acquire these companies and, accordingly, have resulted in an increase to goodwill. Our restructuring expenses may change as our management executes the approved plans. Future decreases to the estimates of executing these acquisition related restructuring plans will be recorded as an adjustment to goodwill indefinitely. Increases to the estimates of the acquisition related restructuring plans will be recorded to operating expenses. The total restructuring costs associated with exiting activities of BEA were $203 million, consisting of severance, excess facilities obligations through fiscal 2017, as well as other restructuring costs. The total restructuring costs associated with exiting activities of Siebel were $592 million, consisting of severance, excess facilities obligations through fiscal 2022, and other restructuring costs. Summary of All Plans (in millions) Accrued May31, 2009(2) SixMonthsEndedNovember30,2009 Accrued Nov. 30, 2009(2) Total Costs Accrued to Date Total Expected Program Costs Initial Costs(3) Adj.to Cost(4) Cash Payments Others(5) Fiscal 2009 Oracle Restructuring Plan New software licenses $ 12 $ 60
DEFERRED REVENUES	7. DEFERRED REVENUES Deferred revenues consisted of the following: (in millions) November30, 2009 May31, 2009 Software license updates and product support $ 3,986 $ 4,158 Services 214 243 New software licenses 195 191 Deferred revenues, current 4,395 4,592 Deferred revenues, non-current (in other non-current liabilities) 176 204 Total deferred revenues $ 4,571 $ 4,796 Deferred software license updates and product support revenues represent customer payments made in advance for annual support contracts. Software license updates and product support contracts are typically billed on a per annum basis in advance and revenues are recognized ratably over the support periods. Deferred service revenues include prepayments for consulting, On Demand and education services. Revenue for these services is recognized as the services are performed. Deferred new software license revenues typically result from undelivered products or specified enhancements, customer specific acceptance provisions or software license transactions that cannot be segmented from consulting services, or certain extended payment term arrangements. In connection with the purchase price allocations related to our acquisitions, we have estimated the fair values of the support obligations assumed. The estimated fair values of the support obligations assumed were determined using a cost build-up approach. The cost build-up approach determines fair value by estimating the costs relating to fulfilling the obligations plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that we would be required to pay a third party to assume the support obligations. These fair value adjustments reduce the revenues recognized over the support contract term of our acquired contracts and, as a result, we did not recognize software license updates and product support revenues related to support contracts assumed from our acquisitions in the amount of $14 million and $80 million for the three months ended November30, 2009 and 2008, respectively, and $23 million and $171 million for the six months ended November30, 2009 and 2008, respectively, which would have been otherwise recorded by our acquired businesses as independent entities.
DERIVATIVE FINANCIAL INSTRUMENTS	8. DERIVATIVE FINANCIAL INSTRUMENTS On December1, 2008, we adopted the new disclosure provisions that are included in ASC 815, Derivatives and Hedging, which had no impact on our consolidated financial position or results of operations and only required additional financial statement disclosures. We have applied the disclosure requirements of ASC 815 on a prospective basis from the date of adoption. Accordingly, disclosures related to interim periods prior to the date of adoption have not been presented. Interest Rate Swap Agreements Cash Flow Hedges We use an interest rate swap agreement to manage the economic effect of variable interest obligations associated with our senior notes due May 2010 (Floating Rate Notes) so that the interest payable on the Floating Rate Notes effectively became fixed at a rate of 4.59%, thereby reducing the impact of future interest rate changes on our future interest expense. The critical terms of the interest rate swap agreement and the Floating Rate Notes match, including the notional amounts, interest rate reset dates, maturity dates and underlying market indices. Accordingly, we have designated this swap agreement as a qualifying hedging instrument and are accounting for it as a cash flow hedge pursuant to ASC 815. The unrealized losses on this interest rate swap agreement are included in accumulated other comprehensive income and the corresponding fair value payables are included in other current liabilities in our consolidated balance sheets. The periodic interest settlements on this interest rate swap agreement, which occur at the same interval as the periodic interest settlements pursuant to the Floating Rate Notes, are recorded as interest expense. Fair Value Hedges In September 2009, we entered into interest rate swap agreements that have the economic effect of modifying the fixed interest obligations associated with the 2014 Notes (as defined in Note 5) so that the interest payable on these notes effectively became variable based on LIBOR. The critical terms of the interest rate swap agreements and the 2014 Notes match, including the notional amounts and maturity dates. Accordingly, we have designated these swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815. These transactions are characterized as fair value hedges for financial accounting purposes because they protect us against changes in the fair value of our fixed rate borrowings due to benchmark interest rate movements. The changes in fair value of these interest rate swap agreements are recognized as interest expense in our consolidated statements of operations with the corresponding amount included in other assets or other non-current liabilities in our consolidated balance sheets. The amount of net gain (loss) attributable to the risk being hedged is recognized as interest expense in our consolidated statement of operations with the corresponding amount included in notes payable and other non-current borrowings. The periodic interest settlements, which occur at the same interval as the 2014 Notes, will be recorded as interest expense. We do not us
STOCKHOLDERS' EQUITY	9. STOCKHOLDERS' EQUITY Stock Repurchases Our Board of Directors has approved a program for us to repurchase shares of our common stock. On October20, 2008, we announced that our Board of Directors approved the expansion of our repurchase program by $8.0 billion and as of November30, 2009, approximately $5.8 billion was available for share repurchases pursuant to our stock repurchase program. We repurchased approximately 23.0million shares for $492 million during the six months ended November30, 2009 (including approximately 0.4million shares for $8 million that were repurchased but not settled at November30, 2009) and approximately 140.1million shares for $2.5 billion during the six months ended November30, 2008 (including 11.0million shares for $176 million that were repurchased but not settled at November30, 2008) under the applicable repurchase programs authorized. 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 repurchase 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. Dividends on Common Stock During the first six months of fiscal 2010, our Board of Directors declared cash dividends of $0.10 per share of our outstanding common stock, which we paid during the same period. In December 2009, our Board of Directors declared a quarterly cash dividend of $0.05 per share of outstanding common stock payable on February9, 2010 to stockholders of record as of the close of business on January19, 2010. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. Stock-Based Compensation Expense and Valuation of Awards Stock-based compensation is included in the following operating expense line items in our condensed consolidated statements of operations: ThreeMonthsEnded November30, SixMonthsEnded November30, (in millions) 2009 2008 2009 2008 Sales and marketing $ 20 $ 16 $ 36 $ 35 Software license updates and product support 4 3 8 6 Cost of services 3 3 6 6 Research and development 44 45 76 82 General and administrative 33 22 62 46 Acquisition related and other 6 11 Total stock-based compensation $ 104 $ 95 $ 188 $ 186 We estimate the fair value of our share-based payments using the Black-Scholes-Merton option-pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models, including the Black-Scholes-Merton option-pricing model, require the input of assumptions, including stock price volatility. Ch
INCOME TAXES	10. INCOME TAXES The effective tax rate for the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to state taxes and earnings considered as indefinitely reinvested in foreign operations. Our effective tax rate was 27.9% and 28.0% for the three and six months ended November30, 2009, respectively and 29.0% and 27.4% for the three and six months ended November30, 2008, respectively. Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2007. Our U.S. federal and, with some exceptions, our state income tax returns have been examined for all years prior to fiscal 2000, and we are no longer subject to audit for those periods. Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining returns affecting unrecognized tax benefits. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 1998. We believe that we have adequately provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will not have a material adverse effect on our consolidated financial position or results of operations; however, there can be no assurances as to the actual outcomes. We previously negotiated three unilateral Advance Pricing Agreements with the U.S. Internal Revenue Service (IRS) that cover many of our intercompany transfer pricing issues and preclude the IRS from making a transfer pricing adjustment within the scope of these agreements. These agreements are effective for fiscal years through May31, 2006. We have submitted to the IRS a request for renewal of this Advance Pricing Agreement for the years ending May31, 2007 through May31, 2011. However, these agreements do not cover all elements of our transfer pricing and do not bind tax authorities outside the United States. We have finalized one bilateral Advance Pricing Agreement, which was effective for the years ending May31, 2002 through May31, 2006 and we have submitted a renewal for the years ending May31, 2007 through May31, 2011. There can be no guarantee that such negotiations will result in an agreement. We concluded an additional bilateral agreement to cover the period from June1, 2001 through January25, 2008.
SEGMENT INFORMATION	11. SEGMENT INFORMATION ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. We are organized geographically and by line of business. While our Chief Executive Officer evaluates results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. We have two businesses, software and services, which are further divided into five operating segments. Our software business is comprised of two operating segments: (1)new software licenses and (2)software license updates and product support. Our services business is comprised of three operating segments: (1)consulting, (2)On Demand and (3)education. The new software licenses line of business is engaged in the licensing of database and middleware software as well as applications software. Database and middleware software includes database management software, application server software, business intelligence software, identification and access management software, content management software, portal and user interaction software, Service-Oriented Architecture and business process management software, data integration software and development tools. Applications software provides enterprise information that enables companies to manage their business cycles and provide intelligence in functional areas such as customer relationship management, financials, human resources, maintenance management, manufacturing, marketing, order fulfillment, product lifecycle management, enterprise project portfolio management, enterprise performance management, procurement, sales, services, enterprise resource planning and supply chain planning. The software license updates and product support line of business provides customers with rights to unspecified software product upgrades and maintenance releases, internet access to technical content, as well as internet and telephone access to technical support personnel during the support period. In addition, the software license updates and product support line of business offers customers Oracle Unbreakable Linux Support, which provides enterprise level support for the Linux operating system, and also offers support for Oracle VM server virtualization software. The consulting line of business provides services to customers in business strategy and analysis, business process simplification, solutions integration and the implementation, enhancement and upgrade of our database, middleware and applications software. On Demand includes Oracle On Demand and Advanced Customer Services. Oracle On Demand provides multi-featured software and hardware management and maintenance services for customers that deploy our database, middleware and applications software at our data
EARNINGS PER SHARE	12. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock awards and shares issuable under the employee stock purchase plans using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share: ThreeMonthsEnded November30, Six Months Ended November30, (in millions, except per share data) 2009 2008 2009 2008 Net income $ 1,458 $ 1,296 $ 2,582 $ 2,373 Weighted average common shares outstanding 5,010 5,127 5,010 5,140 Dilutive effect of employee stock plans 54 60 53 71 Diluted weighted average common shares outstanding 5,064 5,187 5,063 5,211 Basic earnings per share $ 0.29 $ 0.25 $ 0.52 $ 0.46 Diluted earnings per share $ 0.29 $ 0.25 $ 0.51 $ 0.46 Shares subject to anti-dilutive stock options excluded from calculation(1) 177 185 189 164 (1) These weighted shares relate to anti-dilutive stock options as calculated using the treasury stock method (described above) and could be dilutive in the future.
LEGAL PROCEEDINGS	13. LEGAL PROCEEDINGS Securities Class Action Stockholder class actions were filed in the United States District Court for the Northern District of California against us and our Chief Executive Officer on and after March9, 2001. Between March 2002 and March 2003, the court dismissed plaintiffs' consolidated complaint, first amended complaint and a revised second amended complaint. The last dismissal was with prejudice. On September1, 2004, the United States Court of Appeals for the Ninth Circuit reversed the dismissal order and remanded the case for further proceedings. The revised second amended complaint named our Chief Executive Officer, our then Chief Financial Officer (who currently is Chairman of our Board of Directors) and a former Executive Vice President as defendants. This complaint was brought on behalf of purchasers of our stock during the period from December14, 2000 through March1, 2001. Plaintiffs alleged that the defendants made false and misleading statements about our actual and expected financial performance and the performance of certain of our applications products, while certain individual defendants were selling Oracle stock in violation of federal securities laws. Plaintiffs further alleged that certain individual defendants sold Oracle stock while in possession of material non-public information. Plaintiffs also allege that the defendants engaged in accounting violations. On July26, 2007, defendants filed a motion for summary judgment, and plaintiffs filed a motion for partial summary judgment against all defendants and a motion for summary judgment against our Chief Executive Officer. On August7, 2007, plaintiffs filed amended versions of these motions. On October5, 2007, plaintiffs filed a motion seeking a default judgment against defendants or various other sanctions because of defendants' alleged destruction of evidence. A hearing on all these motions was held on December20, 2007. On April7, 2008, the case was reassigned to a new judge. On June27, 2008, the court ordered supplemental briefing on plaintiffs' sanctions motion. On September2, 2008, the court issued an order denying plaintiffs' motion for partial summary judgment against all defendants. The order also denied in part and granted in part plaintiffs' motion for sanctions. The court denied plaintiffs' request that judgment be entered in plaintiffs' favor due to the alleged destruction of evidence, and the court found that no sanctions were appropriate for several categories of evidence. The court found that sanctions in the form of adverse inferences were appropriate for two categories of evidence: e-mails from our Chief Executive Officer's account, and materials that had been created in connection with a book regarding our Chief Executive Officer. The court then denied defendants' motion for summary judgment and plaintiffs' motion for summary judgment against our Chief Executive Officer and directed the parties to revise and re-file these motions to clearly specify the precise contours of the adverse inferences that should be drawn, and to take these inferences into account with regard to the propriety of summary judgment. The court also d

Document Information

Document Information
	6 Months Ended Nov. 30, 2009 USD / shares
Document Information [Line Items]
Document Type	10-Q
Document Period End Date	2009-11-30
Amendment Flag	false

Entity Information

Entity Information (USD $)
In Thousands	6 Months Ended Nov. 30, 2009	Dec. 15, 2009	Nov. 28, 2008
Entity Information [Line Items]
Entity Registrant Name	Oracle Corporation
Entity Central Index Key	0001341439
Current Fiscal Year End Date	--05-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$61,831,796
Entity Common Stock, Shares Outstanding		5,011,220