We are the world’s largest enterprise software company. We develop, manufacture, market, distribute and service database and middleware software as well as applications software designed to help our customers manage and grow their business operations.
Our goal is to offer customers scalable, reliable, secure and integrated software solutions that improve transactional efficiencies, adapt to an organization’s unique needs and allow better ways to access and manage information and automate business processes at a lower total cost of ownership. We seek to be an industry leader in each of the specific product categories in which we compete and to expand into new and emerging markets.
We believe our internal, or organic, growth and continued innovation with respect to our core database, middleware and applications technologies provide the foundation for our long-term strategic plan. In fiscal 2009, we invested $2.8 billion in research and development to enhance our existing portfolio of products and services and to develop new products, features and services.
An active acquisition program is another important element of our corporate strategy. In recent years, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies. We believe our acquisition program supports our long-term strategic direction, strengthens our competitive position, expands our customer base, provides greater scale to accelerate innovation, grows our revenues and earnings, and increases stockholder value. We expect to continue to acquire companies, products, services and technologies.
On April 19, 2009, we entered into an Agreement and Plan of Merger with Sun Microsystems, Inc. (Sun), a provider of enterprise computing systems, software and services, under which we have agreed to acquire all outstanding shares of Sun for $9.50 per share in cash. The estimated total purchase price for Sun is approximately $7.4 billion. The transaction is subject to Sun stockholder approval, regulatory clearances and other customary closing conditions.
Oracle Corporation was incorporated in 2005 as a Delaware corporation and is the successor to operations originally begun in June 1977.
Software and Services
We are organized into 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. Our software and services businesses represented 81% and 19% of our total revenues, respectively, in fiscal 2009, 80% and 20% of our total revenues, respectively, in fiscal 2008 and 79% and 21% of our total revenues, respectively, in fiscal 2007. See Note 15 of Notes to Consolidated Financial Statements for additional information related to our operating segments.
New Software Licenses
The new software licenses operating segment of our software business includes the licensing of database and middleware software, which consists of Oracle Databases and Oracle Fusion Middleware, as well as applications software. Our technology and business solutions are based on an internet model comprised of interconnected databases, application servers, as well as mobile devices. This architecture enables users to access business data and applications through a web browser interface, and is designed to provide customers with the most efficient and cost effective method of managing business information and applications.
In an internet model, database servers manage and protect a customer’s underlying business information, while application servers run the business applications that automate a myriad of business functions. Our architecture provides high quality business information and can be adapted to the specific needs of any industry or application. Oracle technology operates on both single server and clustered server configurations, which we refer to as “grid” software, and supports a choice of operating systems including Linux, Windows and UNIX. Our applications software is designed to help customers reduce the cost and complexity of their IT infrastructures by delivering industry solutions via an open, integrated and standards-based architecture that supports customer choice and reduces customer risk by automating business functions.
New software license revenues include fees earned from granting customers licenses to use our software products and exclude revenues derived from software license updates and product support. The standard end user software license agreement for our products provides for an initial fee to use the product in perpetuity based on a maximum number of processors, named users or other metrics. We also have other types of software license agreements restricted by the number of employees or the license term. New software license revenues represented 31%, 34% and 33% of total revenues in fiscal 2009, 2008 and 2007, respectively.
Database and Middleware Software
Our database and middleware software offerings provide a cost-effective, high-performance platform for running and managing business applications for mid-size businesses and large global enterprises. With an increasing focus by enterprises on reducing their total cost of IT infrastructure, our software is designed to accommodate demanding, non-stop business environments, using low cost server, storage and application grids that can incrementally scale as required. The ability to assign computing resources as required simplifies our customers’ IT capacity, planning and procurement to support all of their business applications. With an Oracle grid infrastructure, our customers can lower their investment in servers and storage, reduce their risk of data loss and IT infrastructure downtime and efficiently utilize available IT resources to meet business users’ quality of service expectations. New software license revenues from database and middleware products represented 72%, 68% and 71% of our new software license revenues in fiscal 2009, 2008 and 2007, respectively.
As the world’s most popular database, Oracle Database enables the secure storage, retrieval and manipulation of all forms of data, including business application and analytics data, and unstructured data in the form of XML files, office documents, images, video and spatial data. Designed for enterprise grid computing, the Oracle Database is available in four editions: Express Edition, Standard Edition One, Standard Edition and Enterprise Edition. All editions are built using the same underlying code, which means that our database software can easily scale from small, single processor servers to clusters of multi-processor servers.
A number of optional offerings are available with Oracle Database Enterprise Edition to address specific customer requirements in the areas of performance and scalability, high availability, data security and compliance, data warehousing, information management and systems management. Examples of these options include:
• Oracle Real Application Clusters, which enables any Oracle Database application to share more efficiently the processing power and memory capacity of a fault tolerant cluster of servers;
• Oracle Advanced Compression, which enables customers to reduce the amount of disk space required to store all their business information and improve query performance;
• Oracle Partitioning, which breaks down large database tables into smaller segments for faster query performance and easier management of data throughout its lifecycle; and
• Oracle In-Memory Database Cache, which improves application performance by caching or storing critical parts of Oracle Database in the main memory of the application tier.
In addition to the four editions of Oracle Database, we also offer a selection of specialized databases:
• Oracle TimesTen In-Memory Database, which is a memory-optimized relational database that delivers low latency and high throughput for applications requiring real-time performance in industries such as communications, financial services and defense;
• Oracle Berkeley DB, which is a family of open source, embeddable, non-relational databases that allows developers to incorporate a fast, scalable and reliable database engine within their applications and devices; and
• Oracle Database Lite, which is a comprehensive solution for developing, deploying and managing applications for mobile and embedded environments. It consists of a small footprint relational database that runs on many devices and platforms, a mobile server that synchronizes data between the mobile devices and Oracle Database, and mobile application development tools.
We also offer a selection of products that are complementary to our database offerings. These include Oracle Exadata, Oracle Enterprise Manager and Oracle Audit Vault.
Oracle Exadata is a family of high performance storage software and hardware products that is designed to improve data warehouse query performance. Built using smart storage software from Oracle and industry-standard hardware from Hewlett-Packard Company (HP), it uses a parallel architecture to increase data bandwidth between database servers and storage. In addition, it enables query processing closer to the data, resulting in faster query processing and less data movement through high bandwidth connections. The Oracle Exadata Storage Server is based on HP servers with Oracle Exadata software pre-installed. It is designed to be an industry-standard storage server, which offers linear scalability and mission-critical reliability, in addition to fast query processing. Oracle Exadata Storage Servers are also the building block for the Oracle Database Machine that is designed for large, multi-terabyte data warehouses. The Oracle Database Machine packages together software, servers, and storage that can scale to support data warehouses and business intelligence applications.
Oracle Enterprise Manager
Oracle Enterprise Manager is designed to deliver top-down applications and software infrastructure management. Our customers use Oracle Enterprise Manager to monitor and manage their applications and underlying software infrastructure, including both Oracle and non-Oracle infrastructure products. Oracle Enterprise Manager can be used to manage packaged applications, such as our Siebel, PeopleSoft, Oracle E-Business Suite or custom applications including Service-Oriented Architecture applications. In addition to managing Oracle software infrastructure products including the Oracle Database, Oracle Fusion Middleware and Oracle WebLogic Server, Oracle Enterprise Manager also supports other third-party infrastructure products.
Oracle Enterprise Manager is designed to monitor service levels and performance, automate tasks, manage configuration information, and provide change management in a unified way across groups of computers or grids.
Oracle Enterprise Manager’s provisioning automates the discovery, tracking and scheduling of software patches and allows IT administrators to apply patches without taking their system down. Additionally, IT administrators can manage systems from anywhere through an HTML browser or through wireless mobile devices.
Oracle Audit Vault
Oracle Audit Vault is designed to reduce the cost and complexity of compliance reporting and detection of unauthorized activities by automating the collection and consolidation of enterprise audit data. Oracle Database provides one of the most advanced auditing capabilities of any database management system. With Oracle Audit Vault, security and database administrators can manage audit policies across their enterprise and automatically collect audit data from Oracle and non-Oracle databases into a centralized, tamper resistant repository. This secure repository is built on Oracle’s scalable architecture to allow retention and aggregation of terabytes of audit data for analysis and reporting. Audit Vault analyzes audit data in real-time based upon enterprise defined policies, issues alerts for unauthorized activities, and provides built-in reports for demonstrating the IT controls required to comply with internal control assessments, including provisions of the U.S. Sarbanes-Oxley Act and other data privacy and protection regulations.
Oracle Fusion Middleware is a broad family of application infrastructure products that forms a reliable and scalable foundation on which customers can build, deploy, secure, access and integrate business applications and automate their business processes. Oracle Fusion Middleware suites and products can be used in conjunction with custom, packaged and composite applications. Oracle Fusion Middleware is available in various products and suites, including the below functional areas:
• Application Server and Application Grid;
• Business Intelligence;
• Identity and Access Management;
• Content Management;
• Portal and User Interaction;
• Service-Oriented Architecture and Business Process Management;
• Data Integration; and
• Development Tools
Oracle Fusion Middleware is designed to protect customers’ IT investments and work with both Oracle and non-Oracle database, middleware and applications products through its “hot-pluggable” architecture (which enables customers to easily install and use Oracle Fusion Middleware products within their existing IT environments) and adherence to industry standards such as Java EE (formerly J2EE) and Business Process Execution Language (BPEL), among others.
By using Oracle Fusion Middleware, our customers increase their capacity to adapt to business changes rapidly, reduce their risks related to security and compliance, increase user productivity and drive better business decisions. Specifically, Oracle Fusion Middleware enables customers to easily integrate heterogeneous business applications, automate business processes, scale applications to meet customer demand, simplify security and compliance, manage lifecycles of documents and get actionable, targeted business intelligence, while continuing to utilize their existing IT systems. In addition, Oracle Fusion Middleware supports multiple development languages and tools, which allows developers to build and deploy web services, web sites, portals and web-based applications. Oracle’s Fusion Middleware is used to support Oracle applications, other enterprise applications, independent software vendors that build their own custom applications and business processes that span multiple application environments.
Application Server and Application Grid
The foundation of Oracle Fusion Middleware is Oracle WebLogic Server. Designed for grid computing, Oracle WebLogic Server incorporates clustering and caching technology, which increases application reliability, performance, security and scalability. Our ongoing development of existing Oracle Fusion Middleware products, combined with our acquisition of BEA Systems, Inc. in fiscal 2008, enables us to provide our customers with additional application grid capabilities, including Oracle Coherence for rapid access to information, Oracle JRockit to create Java virtual machines and the scalable messaging and transaction processing platform products of Oracle Tuxedo.
Oracle Business Intelligence (BI) provides visibility into how customers’ businesses are performing and helps them plan and model to improve that performance. BI is a portfolio of technology and applications that provides an integrated end-to-end system called Enterprise Performance Management (EPM) that unites our BI foundation and data warehousing products with our BI and EPM applications (described further below) to offer our customers an enterprise-wide business intelligence platform.
Our BI foundation products include Oracle BI Suite Enterprise Edition Plus, Oracle BI Standard Edition One, Oracle Essbase and Oracle BI Publisher. Our BI foundation products deliver customers a comprehensive set of business intelligence tools, including interactive dashboards, ad hoc query and analysis, proactive detection and alerts, advanced reporting and publishing, real-time predictive intelligence, mobile analytics and desktop gadgets.
Our data integration and warehousing products enable the extraction, transformation and loading of quality data in order for that data to be accurately searched and analyzed.
Identity and Access Management
Oracle Identity and Access Management products and suites make it easier for our customers to manage multiple user identities, provision users in multiple enterprise applications and systems and manage access privileges for customers, employees and partners. Our customers use Oracle Identity and Access Management offerings to secure their information from potential threats and increase compliance levels, while lowering the total cost of their security and compliance initiatives.
Unstructured information, which is data that is not easily readable or has not been stored so that it can be used efficiently, makes up a large portion of all the information residing in most businesses and public sector entities. Oracle Content Management solutions provide a comprehensive set of capabilities to create, capture, publish, share and collaborate on, archive, retain, manage business process flows and manage information access rights to documents and other unstructured content file types. Oracle Content Management solutions support an extensive set of document and image formats. Specific benefits include the ability to use external facing websites as strategic marketing assets and rapid communication channels, to automate paper-based processes and to enforce document retention and security policies.
Portal and User Interaction
Oracle WebCenter Suite enables personalized web portals and task-oriented web applications to be developed and deployed, all with single sign-on access and security. These features provide users with a single interface through which they can access information from any number of enterprise applications, systems, information sources and processes. Oracle WebCenter also includes integrated Enterprise 2.0 capabilities that enable customers to work together in teams via the internet and capitalize on “collective intelligence” within their enterprise and with their partners and customers. The addition of Oracle WebCenter Services in fiscal 2009 includes the ability to incorporate these Enterprise 2.0 capabilities into existing portal environments, including those built with Oracle Portal, Oracle WebLogic Portal and Oracle WebCenter Interaction (formerly AquaLogic User Interaction).
Service-Oriented Architecture Suite and Business Process Management
Service-Oriented Architecture (SOA) is an IT strategy that creates a modular, re-usable approach to applications development and reduces the need for costly custom development. Oracle SOA Suite is a complete set of service infrastructure components for creating, deploying, and managing SOAs, including Oracle JDeveloper, Oracle BPEL Process Manager, Oracle Web Services Manager, Oracle Business Rules, Oracle Business Activity Monitoring, and Oracle Service Bus. The combination of Oracle Business Process Management and Oracle SOA Suite enables business and IT professionals to collaborate, implement, automate and change business processes in a comprehensive fashion, which accelerates development and transition time and reduces costly quality assurance cycles. Oracle SOA Suite is “hot-pluggable”, enabling customers to easily extend and evolve their architectures instead of replacing existing investments. Oracle SOA Governance maintains the security and integrity of our customers’ SOA deployments.
Through Oracle Data Integration Suite, we offer best-of-breed and unified data integration technologies that enable customers to build, deploy and manage enterprise business data. Our Data Integration foundation allows enterprise data architects to unify, manage, replicate, migrate and distribute data into enterprise applications and orchestrated business processes. With our open and “hot-pluggable” data integration components, organizations can continue to use and evolve their IT infrastructure instead of replacing it. Oracle Data Integration Suite can extract data from one system and load it into another (such as a data warehouse) and then rapidly transform the data into a new format. It also includes technology to address data quality and data profiling.
Oracle JDeveloper is an integrated software environment designed to facilitate rapid development of Java applications, portlets, web services, process models and Rich Internet Applications (RIA) such as Flash and AJAX, among others. Oracle JDeveloper provides a comprehensive Java development environment for modeling, building, debugging and testing enterprise-class Java EE applications and web services. It is also integrated with the Oracle Application Development Framework (ADF), which provides a framework for building applications, including a set of components that enable developers to build RIA based on Java user interface standards and deploy the applications to take advantage of modern RIA technologies.
Our applications software strategy is designed to help customers reduce the cost and complexity of their IT infrastructures, by delivering industry solutions that are complete, open, and integrated. Through a focused strategy of investments in organic research and development and strategic acquisitions, we provide industry-specific solutions for customers in over 20 industries, from retail and communications to financial services and the public sector. Our solutions are delivered on an open, standards-based architecture to support customer choice, reduce customer risk and enable customers to differentiate their businesses using our technologies. New software license revenues from applications software represented 28%, 32% and 29% of new software license revenues in fiscal 2009, 2008 and 2007, respectively.
Central to our applications strategy is our Applications Unlimited program, which is our commitment to offer customers that purchase software license updates and product support contracts a choice as to when they wish to upgrade to the next generation of the products they own. Until our customers reach a decision to upgrade to the next generation of the products they own, we protect their investments in their applications by offering them the ability to purchase software license updates and product support contracts for their existing products. Solutions such as Oracle Fusion Middleware, Oracle Business Intelligence Suite, Oracle WebCenter, and Oracle User Productivity Kit are designed to help customers extend the benefits of their IT investments in our applications, to reduce their investment risk, and to support their evolution to the next generation of enterprise software that best fits their needs.
We also protect our customers’ investments in Oracle applications by delivering new product releases that incorporate customer-specific and industry-specific innovations across product lines. Since announcing our Applications Unlimited program in fiscal 2005, we have delivered a number of new product releases and enhancements. In fiscal 2009, we continued our product investment with new versions of Oracle E-Business Suite, JD Edwards EnterpriseOne, JD Edwards World and Siebel Customer Relationship Management, including CRM On Demand.
Our applications software products combine business functionality with innovative technologies such as role-based analytics, secure search, identity management, self-service and workflow to deliver adaptive industry processes, business intelligence and insights, and optimal end-user productivity. Our applications software products enable efficient management of all core business functions, including:
• Enterprise resource planning (ERP),
• Customer relationship management (CRM),
• Enterprise performance management (EPM),
• Enterprise project portfolio management (EPPM),
• Product lifecycle management (PLM), and
• Industry-specific applications.
Our applications software products are offered as integrated suites or available on a component basis, and all are built on open architectures that are designed for flexible configuration and open, multi-vendor integration. Our applications are available in multiple languages, and support a broad range of location specific requirements, enabling companies to support both global and local business practices and legal requirements.
Oracle Application Integration Architecture provides an open, standards-based framework for creating adaptable, cross-application business processes. For customers looking to quickly deploy integrations between Oracle applications, Oracle Application Integration Architecture also offers packaged integrations, allowing for rapid implementation of mission-critical business applications.
Enterprise Resource Planning (ERP)
Companies use our ERP applications to automate and integrate a variety of their key global business processes, including: manufacturing, order entry, accounts receivable and payable, general ledger, purchasing, warehousing, transportation and human resources. Our ERP applications combine business functionality with innovative technologies such as workflow and self-service applications in order to enable companies to lower the cost of their business operations by providing their customers, suppliers and employees with self-service internet access to both transaction processing and critical business information.
Customer Relationship Management (CRM)
We offer a complete set of CRM applications that manage all of the business processes and associated systems that touch a customer, including:
• Billing and delivery;
• Sales solutions that provide a single repository for customer and supply chain information; and
• Service solutions that increase customer satisfaction by providing visibility into customer billing and order information.
Enterprise Performance Management (EPM)
We offer a full spectrum of EPM applications that are open, industry-specific analytic applications with capabilities such as interactive dashboarding and embedded analytic functionality for delivering insight across the enterprise. Our business analytics solution is tailored to 20 industries, giving customers the ability to monitor, analyze and act upon business intelligence while providing end-to-end visibility into a customer’s operations and financial performance. Our performance management applications, combined with our BI analytics, BI foundation and data warehousing products, enable us to offer our customers an integrated, end-to-end EPM system that spans planning, consolidation, operational analytic applications, business intelligence tools, reporting and data integration, all on a unified business intelligence platform.
Enterprise Project Portfolio Management (EPPM)
With our acquisition of Primavera Software, Inc. in the second quarter of fiscal 2009, we added EPPM software solutions for project-intensive industries such as engineering and construction, aerospace and defense, utilities, oil and gas, manufacturing, and professional services. Our EPPM solutions help companies propose, prioritize and select project investments and plan, manage and control the most complex projects and project portfolios.
Our applications can be tailored to offer customers a variety of industry-specific solutions. As a part of our strategy, we strive to ensure that our applications portfolio addresses the major industry-influenced technology challenges of customers in key industries. We continue to expand our offerings in a number of other key industries we view as strategic to our future growth, including retail, banking and financial services, communications, utilities, health sciences, insurance, manufacturing, education, professional services, and the public sector. In fiscal 2009, we added expertise in the social services industry through our acquisition of Haley Limited, a leading provider of policy modeling and automation software for legislative and regulated industries such as public sector, financial services, and insurance.
Software License Updates and Product Support
We seek to protect and enhance our customers’ current investments in Oracle technology and applications by offering proactive and personalized support services, including our Lifetime Support policy, product enhancements and upgrades. Software license updates provide customers with rights to unspecified software product upgrades and maintenance releases and patches released during the term of the support period. Product support includes internet and telephone access to technical support personnel located in our global support centers, as well as internet access to technical content through My Oracle Support. Software license updates and product support are generally priced as a percentage of the new software license fees. Substantially all of our customers purchase software license updates and product support when they acquire new software licenses. In addition, substantially all of our customers renew their software license updates and product support contracts annually. We also offer Oracle Unbreakable Linux Support, which provides enterprise level support for the Linux operating system and Oracle VM server virtualization software support.
Our software license updates and product support revenues represented 50% of total revenues in fiscal 2009, and 46% of total revenues in both fiscal 2008 and 2007.
Oracle Consulting assists our customers in successfully deploying our applications and technology products. Our consulting services include: business/IT strategy alignment; business process simplification; solution integration; and product implementation, enhancements, and upgrades. These services help our customers achieve measurable business results, manage their total cost of ownership and reduce the risk associated with their product deployment.
Oracle Consulting employs consulting professionals globally to engage our customers directly, as well as to provide specialized expertise to our global systems integrator partners. Oracle Consulting utilizes a global blended delivery model to achieve economies of scale for our customers. This global delivery model consists of onsite consultants within the customer’s local geography as well as consultants in our global delivery and solution centers. Consulting revenues represented 14%, 15% and 16% of total revenues in fiscal 2009, 2008 and 2007, respectively.
On Demand includes our Oracle On Demand and Advanced Customer Services offerings. Oracle On Demand provides multi-featured software and hardware management, and maintenance services for customers that deploy over the internet our database, middleware and applications software delivered at our data center facilities, select partner data centers or physically on-site at customer facilities. Advanced Customer Services consists of solution lifecycle management services, database and application management services, industry-specific solution support centers, and remote and on-site expert services. On Demand revenues represented 3% of total revenues in fiscal 2009, 2008 and 2007.
We provide training to customers, partners and employees as a part of our mission of accelerating the adoption of our technology around the world. We currently offer thousands of courses covering all of our product offerings. Our training is provided primarily through public and private instructor-led classroom events, but is also made available through a variety of online courses and self paced media training on CD-ROMs. Most recently, Oracle University launched live virtual class offerings that allow students anywhere in the world to connect to a live instructor-led class. In addition, we also offer a certification program certifying database administrators, developers and implementers. Oracle University also offers user adoption services designed to provide comprehensive training services to help customers get the most out of their investment in Oracle. Education revenues represented 2% of total revenues in fiscal 2009, 2008 and 2007.
Marketing and Sales
Sales Distribution Channels
We directly market and sell our products and services primarily through our subsidiary sales and service organizations. In the United States, our sales and service employees are based in our headquarters and in field offices throughout the country. Outside the United States, our international subsidiaries license and support our products in their local countries as well as within other foreign countries where we do not operate through a direct sales subsidiary.
We also market our products worldwide through indirect channels. The companies that comprise our indirect channel network are members of the Oracle PartnerNetwork. The Oracle PartnerNetwork is a global program that manages our business relationships with a large, broad-based network of companies, including independent software vendors, system integrators and resellers who deliver innovative solutions and services based upon our products. By offering our partners access to our premier products, educational information, technical services, marketing and sales support, the Oracle PartnerNetwork program extends our market reach by providing our partners with the resources they need to be successful in delivering solutions to customers globally.
We sell our products and provide services globally. Our geographic coverage allows us to draw on business and technical expertise from a global workforce, provides stability to our operations and revenue streams to offset geography-specific economic trends and offers us an opportunity to take advantage of new markets for our products. A summary of our domestic and international revenues and long-lived assets is set forth in Note 15 of Notes to Consolidated Financial Statements.
Seasonality and Cyclicality
Our quarterly results reflect distinct seasonality in the sale of our products and services. Our revenues and operating margins are typically highest in our fourth fiscal quarter and lowest in our first fiscal quarter. General economic conditions also have an impact on our business and financial results. The markets in which we sell our products and services have, at times, experienced weak economic conditions that have negatively affected our revenues. See “Selected Quarterly Financial Data” in Item 7 of this Annual Report for a more complete description of the seasonality and cyclicality of our revenues, expenses and margins.
As of May 31, 2009, we employed approximately 86,000 full-time employees, including 20,000 in sales and marketing, 8,000 in software license updates and product support, 28,000 in services, 22,000 in research and development and 8,000 in general and administrative positions. Of these employees, approximately 28,000 were located in the United States and 58,000 were employed internationally. None of our employees in the United States is represented by a labor union; however, in certain international subsidiaries workers’ councils represent our employees.