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ORACLE CORP Annual Report, Year Ended May 31, 2007

Filing Date
Filed June 29, 2007
Period End
May 31, 2007
Securities
ORCLORCL-PD
In the record · 2016–202610-K1110-Q328-K98

ORCL filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 98 current reports (8-K) between 2016 and 2026.

  1. FY2017 annual report10-K · Jun ’17Jun ’17
  2. Leadership change8-K · Dec ’19Dec ’19
  3. Deal closed8-K · Jun ’22Jun ’22
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed June 29, 2007. Cited figures are marked; the original filing is the authoritative source.

Oracle's fiscal 2007 10-K (year ended May 31, 2007) shows a company growing revenue 25% to $17.996 billiona (22% in constant currency) and net income 26% to $4.274 billion, with diluted EPS of $0.81.

Growth was driven by acquisitions, most notably PeopleSoft (fiscal 2005), Siebel (fiscal 2006) and Hyperion (April 2007), with over $25 billionb invested in acquisitions across the last three fiscal years. Software revenue rose 23% to $14.2 billion, while services rose 33% to $3.8 billion, though services margins are much thinner (about 12% for consulting and negative for On Demand). Software license updates and product support, the highest-margin line at 84% total margin, grew 25% to $8.3 billion and provides a recurring base.

Cash generation remained strong, with operating cash flow of $5.5 billionc and free cash flow of $5.2 billion (122% of net income). Management spent $4.0 billion on share repurchases and $4.97 billion on investing activities, mainly acquisitions. Total debt rose to $7.6 billion and cash and marketable securities fell to $7.0 billion.

Working capital dropped to $3.5 billiond from $5.0 billion, and goodwill rose to $13.5 billion, so acquisition integration and impairment risk are meaningful for investors. Key risks flagged in the filing include the PeopleSoft Customer Assurance Program, a contingent liability with an aggregate potential obligation of $3.2 billion that has not been recorded, pending litigation including securities class actions and the SAP IP suit, and ongoing reliance on acquisitions for growth. The filing also notes that Oracle's new software license revenues grew only 20% and that intangible amortization rose to $878 million, which pressures margins.

02—Key points

Key Highlights

  1. Total revenue grew 25% to $17.996 billion in fiscal 2007 (22% constant currency), led by acquisitions including Hyperion, Siebel and PeopleSoft.
  2. Net income rose 26% to $4.274 billion and diluted EPS rose to $0.81 from $0.64, with operating margin at 33%.
  3. Software license updates and product support revenue reached $8.3 billion (46% of total revenue) at an 84% margin, providing recurring revenue.
  4. Free cash flow was $5.2 billion, 122% of net income, with operating cash flow of $5.5 billion.
  5. Oracle returned $4.0 billion through share repurchases and had $4.2 billion remaining under its authorization as of May 31, 2007.
  6. Total borrowings rose to $7.6 billion, while goodwill grew to $13.5 billion, increasing exposure to acquisition integration and impairment risk.
  7. The PeopleSoft Customer Assurance Program carries an aggregate potential obligation of $3.2 billion, which Oracle has not recorded as a liability.

03—Questions

Frequently Asked Questions

  1. How much did Oracle grow in fiscal 2007 and what drove it?

    Total revenue grew 25% to $18.0 billion, or 22% in constant currency. Growth came from higher demand, strong sales execution and revenue from acquired companies, including Hyperion (acquired April 2007), Siebel (January 2006) and i-flex. New software license revenue grew 20%, and services grew 33%.

  2. Is Oracle's growth profitable and sustainable?

    Profitability improved, with net income up 26% and operating margin steady at 33%. Software support is the most profitable and recurring business. Services margins are far lower, at about 12% for consulting and negative for On Demand, and amortization of acquired intangibles rose to $878 million, which weighs on margins.

  3. What are the main financial risks in the filing?

    The main risks are the $3.2 billion PeopleSoft Customer Assurance Program contingent obligation (not recorded as a liability), exposure to large litigation including securities class actions and the SAP IP case, $7.6 billion of debt, and reliance on continued acquisitions, which carry integration and goodwill impairment risk.

  4. How is Oracle returning capital to shareholders?

    Oracle does not pay cash dividends. It repurchased 234 million shares for $4.0 billion in fiscal 2007 and had about $4.2 billion left under its repurchase program at May 31, 2007. Management noted that buybacks may slow if cash is needed for acquisitions or debt repayment.

  5. How strong is Oracle's liquidity position?

    Liquidity is solid but tighter than the prior year. Cash, equivalents and marketable securities were $7.0 billion, of which $5.0 billion was held by foreign subsidiaries. Working capital fell to $3.5 billion from $5.0 billion, and the company has a $3.0 billion revolving credit facility, undrawn at year-end, that backs its $3.0 billion commercial paper program.

04—Continue

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