Oracle (ORCL) 10-Q 29 Mar 10 2010 Q3 Quarterly report Financial data

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Feb. 28, 2010	May. 31, 2009
Current assets:
Cash and cash equivalents	$9,331	$8,995
Marketable securities	8,158	3,629
Trade receivables, net of allowances for doubtful accounts of $273 and $270 as of February 28, 2010 and May 31, 2009, respectively	3,898	4,430
Inventories	315	0
Deferred tax assets	978	661
Prepaid expenses and other current assets	1,299	866
Total current assets	23,979	18,581
Non-current assets:
Property, plant and equipment, net	2,869	1,922
Intangible assets: software support agreements and related relationships, net	3,038	3,411
Intangible assets: other, net	6,830	3,858
Goodwill	20,415	18,842
Other assets	2,255	802
Total non-current assets	35,407	28,835
Total assets	59,386	47,416
Current liabilities:
Notes payable, current and other current borrowings	4,220	1,001
Accounts payable	616	271
Accrued compensation and related benefits	1,452	1,409
Deferred revenues	5,389	4,592
Other current liabilities	2,574	1,876
Total current liabilities	14,251	9,149
Non-current liabilities:
Notes payable and other non-current borrowings	11,498	9,237
Income taxes payable	3,275	2,423
Deferred tax liabilities	339	480
Other non-current liabilities	1,172	682
Total non-current liabilities	16,284	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: 5,015 shares as of February 28, 2010 and 5,005 shares as of May 31, 2009	13,973	12,980
Retained earnings	14,257	11,894
Accumulated other comprehensive income	246	216
Total Oracle Corporation stockholders' equity	28,476	25,090
Noncontrolling interests	375	355
Total equity	28,851	25,445
Total liabilities and equity	$59,386	$47,416

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets Parenthetical (Unaudited) (USD $)
In Millions, except Per Share data	Feb. 28, 2010	May. 31, 2009
Allowance for doubtful accounts receivable	$273	$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	5,015	5,005

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Feb. 28, 2010	3 Months Ended Feb. 28, 2009	9 Months Ended Feb. 28, 2010	9 Months Ended Feb. 28, 2009
Software revenues:
New software licenses	$1,718	$1,516	$4,399	$4,379
Software license updates and product support revenue	3,297	2,917	9,661	8,702
Software revenues	5,015	4,433	14,060	13,081
Hardware systems revenue:
Hardware systems products revenue	273	0	273	0
Hardware systems support revenue	185	0	185	0
Hardware systems revenue	458	0	458	0
Services	931	1,020	2,797	3,310
Total revenues	6,404	5,453	17,315	16,391
Operating Expenses:
Sales and marketing	1,241	1,054	3,335	3,312
Software license updates and product support costs	281	256	771	795
Hardware systems products costs	206	0	206	0
Hardware systems support costs	116	0	116	0
Services	816	855	2,429	2,820
Research and development	823	677	2,191	2,037
General and administrative	236	192	619	571
Amortization of intangible assets	502	437	1,369	1,276
Acquisition related and other	34	27	50	98
Restructuring	306	15	467	46
Total operating expenses	4,561	3,513	11,553	10,955
Operating income	1,843	1,940	5,762	5,436
Interest expense	(186)	(154)	(553)	(471)
Non-operating income (expense), net	(75)	24	(41)	114
Income before provision for income taxes	1,582	1,810	5,168	5,079
Provision for income taxes	393	481	1,396	1,377
Net income	$1,189	$1,329	$3,772	$3,702
Earnings per share:
Earnings per share, basic	0.24	0.27	0.75	0.73
Earnings per share, diluted	0.23	0.26	0.74	0.72
Weighted average common shares outstanding:
Weighted average common shares outstanding, basic	5,015	5,005	5,012	5,095
Weighted average common shares outstanding, diluted	5,076	5,056	5,067	5,159
Dividends declared per common share	0.05	$0	0.15	$0

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	9 Months Ended Feb. 28, 2010	9 Months Ended Feb. 28, 2009
Cash Flows From Operating Activities:
Net income	$3,772	$3,702
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	196	198
Amortization of intangible assets	1,369	1,276
Deferred income taxes	(362)	(302)
Stock-based compensation	310	274
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards	117	141
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards, operating activities	(71)	(92)
Other, net	79	68
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net	1,614	1,848
Decrease in inventories	18	0
Decrease in prepaid expenses and other assets	375	336
Decrease in accounts payable and other liabilities	(842)	(1,097)
Decrease in income taxes payable	(269)	(51)
Decrease in deferred revenues	(136)	(54)
Net cash provided by operating activities	6,170	6,247
Cash Flows From Investing Activities:
Purchases of marketable securities and other investments	(11,162)	(6,906)
Proceeds from maturities and sales of marketable securities and other investments	7,121	6,397
Acquisitions, net of cash acquired	(5,567)	(1,165)
Capital expenditures	(161)	(491)
Net cash used for investing activities	(9,769)	(2,165)
Cash Flows From Financing Activities:
Payments for repurchases of common stock	(738)	(3,704)
Proceeds from issuances of common stock	602	448
Payment of dividends to stockholders	(753)	0
Proceeds from borrowings, net of issuance costs	6,420	0
Repayments of borrowings	(1,708)	(4)
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards, financing activities	71	92
Distributions to noncontrolling interests	(59)	(53)
Net cash provided by (used for) financing activities	3,835	(3,221)
Effect of exchange rate changes on cash and cash equivalents	100	(912)
Net increase (decrease) in cash and cash equivalents	336	(51)
Cash and cash equivalents at beginning of period	8,995	8,262
Cash and cash equivalents at end of period	9,331	8,211
Non-cash investing and financing transactions:
Fair value of stock options and restricted stock-based awards assumed in connection with acquisitions	91	1
Increase in unsettled repurchases of common stock	$4	$4

BASIS OF PRESENTATION AND RECEN

BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS
	3 Months Ended Feb. 28, 2010
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. On January26, 2010, we completed our acquisition of Sun Microsystems, Inc. (Sun), a provider of hardware systems, software and services, by means of a merger of one of our wholly owned subsidiaries with and into Sun such that Sun became a wholly owned subsidiary of Oracle. As a result of our acquisition of Sun, we entered into a new hardware systems business. Our hardware systems business consists of two operating segments: hardware systems products and hardware systems support. In addition, we enhanced our existing software and services businesses with additional offerings. The condensed consolidated financial statements included in this Quarterly Report include the financial results of Sun prospectively from the date of acquisition. Upon completion of our acquisition of Sun, we adopted certain new significant accounting policies as noted below. Refer to Note 2 below for additional details of our acquisition of Sun. 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 the 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, Accounting Standards Update No.2009-13, Revenue Recognition (Topic 605)Multiple-Deliverable Revenue Arrangements (ASU 2009-13) and Accounting Standards Update No.2009-14, Software (Topic 985)Certain Revenue Arrangements That Include Software Elements (ASU 2009-14). As a result of ou

ACQUISITIONS

ACQUISITIONS
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
ACQUISITIONS	2. ACQUISITIONS Acquisition of Sun Microsystems, Inc. On January26, 2010 we completed our acquisition of Sun Microsystems, Inc., a provider of hardware systems, software and services, by means of a merger of one of our wholly owned subsidiaries with and into Sun such that Sun became a wholly owned subsidiary of Oracle. We acquired Sun to, among other things, expand our product offerings by adding Sun's existing hardware systems business and broadening our software and services offerings. We have included the financial results of Sun in our condensed consolidated financial statements from the date of acquisition. For the three and nine months ended February28, 2010, Sun contributed $543 million to our total revenues. The total preliminary purchase price for Sun was approximately $7.3 billion and was comprised of: (in millions, except per share amounts) Acquisition of approximately 757million shares of outstanding common stock of Sun at $9.50 per share in cash $ 7,196 Preliminary fair value of stock options and restricted stock-based awards assumed 90 Total preliminary purchase price $ 7,286 The preliminary fair values of stock options assumed were estimated using a Black-Scholes-Merton option-pricing model. The preliminary fair value of unvested Sun stock options and restricted stock-based awards will be recorded as operating expense over the remaining service periods, while the preliminary fair values of vested stock options and restricted stock-based awards are included in the total purchase price. The preliminary purchase price for Sun is subject to change during the measurement period as we finalize the number of Sun common shares outstanding that we purchased, validate the conversion calculations of Sun stock options and restricted stock-based awards assumed, and finalize the proportion of such stock options and restricted stock-based awards assumed that are vested as of the acquisition date. Preliminary Purchase Price Allocation Pursuant to our business combinations accounting policy, the total preliminary purchase price for Sun was allocated to the preliminary net tangible and intangible assets based upon their preliminary fair values as of January26, 2010 as set forth below. The excess of the preliminary purchase price over the preliminary net tangible assets and preliminary intangible assets was recorded as goodwill. The preliminary allocation of the purchase price was based upon a preliminary valuation and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, certain legal matters, income and non-income based taxes and residual goodwill. We expect to continue to obtain information to assist us in determining the fair value of the net assets acquired at the acquisition date during the measurement period. Our preliminary purchase price allocation for Sun is as follows: (in millions) C

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
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): February28, 2010 May31, 2009 FairValueMeasurements Using Input Types FairValueMeasurements Using Input Types (in millions) Level1 Level2 Total Level1 Level2 Total Assets: Money market funds $ 1,882 $ $ 1,882 $ 467 $ $ 467 U.S. Treasury, U.S. government and U.S. government agency debt securities 2,653 15 2,668 4,078 4,078 Commercial paper debt securities 4,681 4,681 1,365 1,365 Corporate debt securities and other 2,381 2,381 1,335 1,335 Derivative financial instruments 23 23 Total assets $ 4,535 $ 7,100 $ 11,635 $ 4,545 $ 2,700 $ 7,245 Liabilities: Derivative financial instruments $ $ 9 $ 9 $ $ 35 $ 35 Total liabilities $ $ 9 $ 9 $ $ 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, that wer

INVENTORIES

INVENTORIES
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
INVENTORIES	4. INVENTORIES Inventories consisted of the following as of February28, 2010 (insignificant as of May31, 2009): (in millions) February28,2010 Raw materials $ 105 Work-in-process 52 Finished goods 158 Total $ 315

INTANGIBLE ASSETS AND GOODWILL

INTANGIBLE ASSETS AND GOODWILL
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
INTANGIBLE ASSETS AND GOODWILL	5. INTANGIBLE ASSETS AND GOODWILL The changes in intangible assets for fiscal 2010 and the gross and net book value of intangible assets at February28, 2010 and May31, 2009 were as follows: Intangible Assets, Gross Accumulated Amortization IntangibleAssets,Net Weighted Average Useful Life (Dollars in millions) May31, 2009 Additions February28, 2010 May31, 2009 Expense February28, 2010 May31, 2009 February28, 2010 Software support agreements and related relationships $ 5,012 $ 48 $ 5,060 $ (1,601 ) $ (421 ) $ (2,022 ) $ 3,411 $ 3,038 9years Hardware systems support agreements and related relationships 771 771 (12 ) (12 ) 759 7 years Developed technology 3,844 1,444 5,288 (1,925 ) (568 ) (2,493 ) 1,919 2,795 5 years Core technology 1,502 578 2,080 (687 ) (197 ) (884 ) 815 1,196 5 years Customer relationships 1,284 481 1,765 (320 ) (140 ) (460 ) 964 1,305 7 years Trademarks 273 231 504 (113 ) (31 ) (144 ) 160 360 7 years In-process research and development 415 415 415 N.A Total $ 11,915 $ 3,968 $ 15,883 $ (4,646 ) $ (1,369 ) $ (6,015 ) $ 7,269 $ 9,868 Total amortization expense related to our intangible assets subject to amortization was $502 million and $1.4 billion for the three and nine months ended February28, 2010, respectively and $437 million and $1.3 billion for the three and nine months ended February28, 2009, respectively. Estimated future amortization expense related to our intangible assets subject to amortization was $609 million for the remainder of fiscal 2010, $2.3 billion in fiscal 2011, $2.0 billion in fiscal 2012, $1.6 billion in fiscal 2013, $1.3 billion in fiscal 2014, $1.0 billion in fiscal 2015 and $631 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 nine months ended February28, 2010 were as follows: (in millions) New Software Licenses Software License Updatesand Product Support Services Other(2) Total Balances as of May31, 2009 $ 5,716 $ 11,334 $ 1,792 $ $ 18,842 Goodwill from acquisitions 179 119 2 1,304 1,604 Goodwill adjustments for acquisitions consummated since the beginning of fiscal 2010(1) 9 7 16 Goodwill adjustments for acquisitions consummated prior to fiscal 2010(1) (18 ) (26 ) (3 ) (47 ) Balances as of February28, 2010 $ 5,886 $ 11,434 $ 1,791 $ 1,304 $ 20,415 (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 alloc

NOTES PAYABLE AND OTHER BORROWI

NOTES PAYABLE AND OTHER BORROWINGS
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
NOTES PAYABLE AND OTHER BORROWINGS	6. NOTES PAYABLE AND OTHER BORROWINGS Commercial Paper Program In the third quarter of fiscal 2010, we issued $2.0 billion of unsecured short-term commercial paper notes (Commercial Paper Notes) pursuant to our commercial paper program, which allows us to issue and sell unsecured short-term promissory notes pursuant to a private placement exemption from the registration requirements under federal and state securities laws (see Note 7 of Notes to Consolidated Financial Statements included in our fiscal 2009 Annual Report on Form 10-K for further information regarding our commercial paper program). We issued these Commercial Paper Notes to finance a portion of our purchase price for our acquisition of Sun. As of February28, 2010, we had $951 million of Commercial Paper Notes outstanding at a weighted average yield, including issuance costs, of 0.18% that mature at various dates through June14, 2010 (none outstanding as of May31, 2009). We back-stop these notes with our revolving credit agreements and therefore, as of February28, 2010, we had $3.9 billion of capacity remaining under our commercial paper program. As described below, one of our revolving credit agreements expired in March 2010. Senior Notes and Other 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 for our acquisition of Sun and acquisition related expenses. The effective interest yields of the 2014 Notes, 2019 Notes and 2039 Notes at February28, 2010 were 3.75%, 5.05% 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 (1.37% at February28, 2010; see Note 9 for additional information). The Senior Notes rank pari passu with the Commercial Paper Notes that we have issued, any other notes we may issue in the future pursuant to 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 and our Commercial Paper Notes. Separately, shortly after the closing of our acquisition of Sun we repaid, in full, $700 million of Sun's legacy convertible notes in the third quarter of fiscal 2010. We were in compliance with all debt-related covenants at February28, 2010. Future principal payments for all of our borrowings at February28, 2010 were as follows: $1.9 billion in fiscal 2010, $2.3 billion in fiscal 2011, none in fiscal 2012, $1.3 billion in fiscal 2013, none in fiscal 2014 and $10.3 billion thereafter. Revolving Credit Agreement On March16, 2010, our $2.0billion, 364-Day Revolving Credit Agreement dated March17, 2009, among Oracle; the lenders named therein;

RESTRUCTURING ACTIVITIES

RESTRUCTURING ACTIVITIES
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
RESTRUCTURING ACTIVITIES	7. RESTRUCTURING ACTIVITIES Sun Restructuring Plan During the third quarter of fiscal 2010, our management approved, committed to and initiated a plan to restructure our operations due to our acquisition of Sun (the Sun Restructuring Plan) in order to improve the cost efficiencies in our merged operations. The total estimated restructuring costs associated with the Sun Restructuring Plan are $325 million consisting primarily of employee severance expenses, abandoned facilities obligations and contract termination costs. The restructuring costs will be recorded to the restructuring expense line item within our consolidated statements of operations as they are recognized. We recorded $235 million of restructuring expenses in connection with the Sun Restructuring Plan during the three and nine months ended February28, 2010 and we expect to incur the majority of the approximately $90 million of remaining expenses pursuant to the Sun Restructuring Plan through fiscal 2011. Any changes to the estimates of executing the Sun Restructuring Plan will be reflected in our future results of operations. 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 subsequently amended the 2009 Plan 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 third quarter and first nine months of fiscal 2010, we recorded $71 million and $232 million, respectively, of restructuring expenses for which the substantial majority were in connection with the 2009 Plan. We expect to incur the majority of the remaining $126 million during our fourth quarter 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 Included in our Other restructuring plans line in the table below are certain restructuring plans that relate to companies that we acquired 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. Summary of All Plans (in millions) Accrued May31, 2009(2) Nin

DEFERRED REVENUES

DEFERRED REVENUES
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
DEFERRED REVENUES	8. DEFERRED REVENUES Deferred revenues consisted of the following: (in millions) February28, 2010 May31, 2009 Software license updates and product support $ 4,161 $ 4,158 Hardware systems support 487 Services 351 243 New software licenses 354 191 Hardware systems products 36 Deferred revenues, current 5,389 4,592 Deferred revenues, non-current (in other non-current liabilities) 430 204 Total deferred revenues $ 5,819 $ 4,796 Deferred software license updates and product support revenues and deferred hardware systems support revenues represent customer payments made in advance for annual support contracts. Software license updates and product support contracts and hardware systems support contracts are typically billed on a per annum basis in advance and revenues are recognized ratably over the support periods. Deferred services 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, software license transactions that cannot be segmented from consulting services, or certain extended payment term arrangements. Deferred hardware systems product revenues typically result from undelivered products or specified enhancements, sales to customers, including channel partners and resellers, where revenue recognition criteria have not been met, transactions involving customer specific acceptance provisions or transactions that cannot be segmented from consulting services. 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. As a result, we did not recognize software license updates and product support revenues related to software support contracts assumed from our acquisitions in the amount of $26 million and $51 million for the three months ended February28, 2010 and 2009, respectively, and $49 million and $222 million for the nine months ended February28, 2010 and 2009, respectively, which would have been otherwise recorded by our acquired businesses as independent entities. In addition, we did not recognize hardware systems support revenues related to hardware systems support contracts that would have otherwise been recorded by Sun as an independent entity, in the amount of $39 million for the three and nine months ended February28, 2010.

DERIVATIVE FINANCIAL INSTRUMENT

DERIVATIVE FINANCIAL INSTRUMENTS
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
DERIVATIVE FINANCIAL INSTRUMENTS	9. 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 payable is 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 6) 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 values of these interest rate swap agreements are recognized as interest expense in our consolidated statements of operations with the corresponding amounts 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, are recorded as interest expense. We do not use a

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
STOCKHOLDERS' EQUITY	10. 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 February28, 2010, approximately $5.5 billion was available for share repurchases pursuant to our stock repurchase program. We repurchased approximately 33.3million shares for $742 million during the nine months ended February28, 2010 (including approximately 0.7million shares for $16 million that were repurchased but not settled at February28, 2010) and approximately 211.6million shares for $3.7 billion during the nine months ended February28, 2009 (including 1.7million shares for $28 million that were repurchased but not settled at February28, 2009) 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 nine months of fiscal 2010, our Board of Directors declared cash dividends of $0.15 per share of our outstanding common stock, which we paid during the same period. In March 2010, our Board of Directors declared a quarterly cash dividend of $0.05 per share of outstanding common stock payable on May5, 2010 to stockholders of record as of the close of business on April14, 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 Stock Options and Restricted Stock-Based Awards Stock-based compensation is included in the following operating expense line items in our condensed consolidated statements of operations: ThreeMonthsEnded February28, NineMonthsEnded February28, (in millions) 2010 2009 2010 2009 Sales and marketing $ 21 $ 16 $ 57 $ 51 Software license updates and product support 4 3 12 10 Hardware systems products 2 2 Hardware systems support 1 1 Services 4 3 10 9 Research and development 46 39 122 121 General and administrative 34 24 96 69 Acquisition related and other 10 3 10 14 Total stock-based compensation $ 122 $ 88 $ 310 $ 274 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, inclu

INCOME TAXES

INCOME TAXES
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
INCOME TAXES	11. 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 24.8% and 27.0% for the three and nine months ended February28, 2010, respectively and 26.6% and 27.1% for the three and nine months ended February28, 2009, respectively. Our net deferred tax assets increased from $517 million as of November 30, 2009 to $1.9 billion as of February28, 2010, primarily as a result of our acquisition of Sun. We believe it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards, and tax credit carryforwards. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. As of February28, 2010, we had $2.9 billion of unrecognized tax benefits recorded on our condensed consolidated balance sheet, which includes $579 million resulting from our acquisition of Sun. 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 a

SEGMENT INFORMATION

SEGMENT INFORMATION
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
SEGMENT INFORMATION	12. 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. As a result of our acquisition of Sun in the third quarter of fiscal 2010, we entered into a new hardware systems business with two operating segments as described further below. We have three businessessoftware, hardware systems and serviceswhich are further divided into seven operating segments. Our software business is comprised of two operating segments: (1)new software licenses and (2)software license updates and product support. Our hardware systems business is comprised of two operating segments: (1)hardware systems products and (2)hardware systems 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 our 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. As a result of our acquisition of Sun in the third quarter of fiscal 2010, we acquired certain software technologies that expanded and enhanced our existing database and middleware software product offerings, including Java, which is a global software development platform used in a wide range of computers, networks and devices. 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. The hardware systems products line of business consists primarily of computer server and storage product offerings. Most of

EARNINGS PER SHARE

EARNINGS PER SHARE
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
EARNINGS PER SHARE	13. 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 options and restricted stock-based 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: Three Months Ended February28, Nine Months Ended February28, (in millions, except per share data) 2010 2009 2010 2009 Net income $ 1,189 $ 1,329 $ 3,772 $ 3,702 Weighted average common shares outstanding 5,015 5,005 5,012 5,095 Dilutive effect of employee stock plans 61 51 55 64 Diluted weighted average common shares outstanding 5,076 5,056 5,067 5,159 Basic earnings per share $ 0.24 $ 0.27 $ 0.75 $ 0.73 Diluted earnings per share $ 0.23 $ 0.26 $ 0.74 $ 0.72 Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation(1) 128 185 169 171 (1) These weighted shares relate to anti-dilutive stock options and restricted stock-based awards as calculated using the treasury stock method (described above) and could be dilutive in the future.

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS
	3 Months Ended Feb. 28, 2010
Notes to Condensed Consolidated Financial Statements [Abstract]
LEGAL PROCEEDINGS	14. 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 dir

Document Information

Document Information
	9 Months Ended Feb. 28, 2010
Document Information [Line Items]
Document Type	10-Q
Document Period End Date	2010-02-28
Amendment Flag	false

Entity Information

Entity Information (USD $)
In Thousands	9 Months Ended Feb. 28, 2010	Mar. 23, 2010	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		5,019,091