10-KPeriod: FY2011

ORACLE CORP Annual Report, Year Ended May 31, 2011

Filed June 28, 2011For Securities:ORCLORCL-PD

Summary

Oracle Corporation's 2011 10-K report highlights a year of significant growth, largely driven by the integration of Sun Microsystems acquired in the previous year. Total revenues saw a substantial increase, with the hardware systems business showing particularly strong growth due to its first full year of operations. The company continues its strategy of internal innovation and strategic acquisitions, investing heavily in research and development to enhance its software and hardware offerings. Oracle emphasizes its "engineered systems" like Exadata and Exalogic, which combine hardware and software for enhanced performance. While the software business remains the core revenue driver, the expansion into hardware signifies a strategic shift. Despite the growth, Oracle faces intense competition across all its business segments and acknowledges risks related to economic conditions, technological changes, and successful integration of acquisitions. The company remains committed to returning value to shareholders through dividends and share repurchases, supported by strong free cash flow generation.

Financial Highlights

57 data points
Beta

Revenue

$35.62B

94.2% Gross Margin

Net Income

$8.55B

24.0% Net Margin

EPS (Diluted)

$1.67

Total Assets

$73.53B

Cash & Equivalents

$16.16B

Free Cash Flow

$10.76B

Financial Statements
Beta
Revenue$35.62B
Cost of Revenue$2.06B
Gross Profit$33.56B
R&D Expenses$4.52B
Operating Expenses$23.59B
Operating Income$12.03B
Interest Expense$808.00M
Net Income$8.55B
EPS (Basic)$1.69
EPS (Diluted)$1.67
Shares Outstanding (Basic)5.05B
Shares Outstanding (Diluted)5.13B

Key Highlights

  • 1Total revenues increased by 33% (30% in constant currency) to $35.6 billion, significantly boosted by the first full year of Sun Microsystems' contribution, particularly in the hardware segment.
  • 2The hardware systems business saw a revenue surge of 191% (184% in constant currency) to $4.4 billion, reflecting the strategic acquisition and integration of Sun.
  • 3Software license updates and product support revenue grew 13% (12% in constant currency) to $14.8 billion, demonstrating the recurring revenue strength and high-margin nature of this segment.
  • 4Research and development expenses increased by 39% (38% in constant currency) to $4.5 billion, underscoring Oracle's commitment to innovation and product development, including its "engineered systems."
  • 5The company reported strong operating income of $12.0 billion and net income of $8.5 billion, leading to diluted EPS of $1.67.
  • 6Oracle generated substantial free cash flow of $10.8 billion, a 27% increase from the prior year, supporting its capital allocation strategy.
  • 7The company continued its share repurchase program, buying back $1.2 billion in stock, and maintained its quarterly cash dividend payments.

Frequently Asked Questions

The primary driver of Oracle's revenue growth in fiscal year 2011 was the full year impact of the Sun Microsystems acquisition, which significantly boosted the hardware systems business, alongside continued growth in the software and services segments.

The acquisition of Sun Microsystems, completed in January 2010, led to a significant increase in Oracle's total revenues, particularly in the hardware systems segment, which contributed its first full year of results in FY2011. This acquisition also increased operating expenses due to the nature of the hardware business and amortization of acquired intangible assets.

Oracle's strategy involves engineering its hardware and software products to work together more effectively, creating "engineered systems" like Oracle Exadata and Oracle Exalogic. These integrated systems are designed to deliver superior computing performance, reliability, and security, offering customers time savings and operational cost advantages.

Key risks identified include adverse impacts from general economic and market conditions, failure to achieve financial forecasts due to sales forecast inaccuracies, challenges in developing and integrating new products and services, intense competition in both hardware and software markets, and the inherent risks associated with acquisitions, including integration difficulties and potential liabilities.