SEGMENT INFORMATION (Tables)

12 Months Ended

May 31, 2011

Notes to Condensed Consolidated Financial Statements

Summary of Businesses and Operating Segments Results

	Year Ended May 31,
(in millions)	2011	2010	2009
New software licenses:
Revenues(1)	$9,220	$7,525	$7,112
Sales and distribution expenses	4,692	3,980	4,006
Margin(2)	$4,528	$3,545	$3,106
Software license updates and product support:
Revenues(1)	$14,876	$13,175	$11,997
Software license update and product support expenses	1,144	958	1,012
Margin(2)	$13,732	$12,217	$10,985
Total software business:
Revenues(1)	$24,096	$20,700	$19,109
Expenses	5,836	4,938	5,018
Margin(2)	$18,260	$15,762	$14,091
Hardware systems products:
Revenues	$4,382	$1,493	$—
Hardware systems products expenses	2,061	850	—
Sales and distribution expenses	960	307	—
Margin (2)	$1,361	$336	$—
Hardware systems support:
Revenues (1)	$2,710	$912	$—
Hardware systems support expenses	1,221	408	—
Margin (2)	$1,489	$504	$—
Total hardware systems business:
Revenues (1)	$7,092	$2,405	$—
Expenses	4,242	1,565	—
Margin (2)	$2,850	$840	$—
Consulting:
Revenues(1)	$2,901	$2,705	$3,221
Services expenses	2,331	2,319	2,686
Margin(2)	$570	$386	$535
Cloud Services:
Revenues(1)	$1,376	$887	$780
Services expenses	1,042	679	566
Margin(2)	$334	$208	$214
Education:
Revenues(1)	$385	$337	$385
Services expenses	270	247	282
Margin(2)	$115	$90	$103
Total services business:
Revenues(1)	$4,662	$3,929	$4,386
Services expenses	3,643	3,245	3,534
Margin(2)	$1,019	$684	$852
Totals:
Revenues(1)	$35,850	$27,034	$23,495
Expenses	13,721	9,748	8,552
Margin(2)	$22,129	$17,286	$14,943

__________

(1)

Operating segment revenues generally differ from the external reporting classifications due to certain software license products that are classified as service revenues for management reporting purposes. Software license updates and product support revenues for management reporting included $80 million, $86 million and $243 million of revenues that we did not recognize in the accompanying consolidated statements of operations in fiscal 2011, 2010 and 2009, respectively. 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 $148 million and $128 million in fiscal 2011 and 2010, respectively. See Note 10 for an explanation of these adjustments and the following table for a reconciliation of operating segment revenues to total revenues.

(2)

The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, information technology, marketing and partner programs, and corporate and general and administrative expenses. Additionally, the margins do not reflect inventory fair value adjustments, amortization of intangible assets, acquisition related and other expenses, restructuring costs, or stock-based compensation.

Reconciliation of Revenue from Segments to Consolidated Revenues

	Year Ended May 31,
(in millions)	2011	2010	2009
Total revenues for reportable segments	$35,850	$27,034	$23,495
Software license updates and product support revenues(1)	(80)	(86)	(243)
Hardware systems support revenues (1)	(148)	(128)	—
Total revenues	$35,622	$26,820	$23,252

Reconciliation of Total Margin from Segments to Consolidated Income before Provision for Income Taxes

Total margin for reportable segments	$22,129	$17,286	$14,943
Software license updates and product support revenues(1)	(80)	(86)	(243)
Hardware systems support revenues (1)	(148)	(128)	—
Hardware systems products expenses (2)	—	(29)	—
Product development and information technology expenses	(4,778)	(3,479)	(2,984)
Marketing and partner program expenses	(601)	(503)	(439)
Corporate and general and administrative expenses	(800)	(755)	(634)
Amortization of intangible assets	(2,428)	(1,973)	(1,713)
Acquisition related and other	(208)	(154)	(117)
Restructuring	(487)	(622)	(117)
Stock-based compensation	(500)	(421)	(340)
Interest expense	(808)	(754)	(630)
Non-operating income (expense), net	120	(139)	108
Income before provision for income taxes	$11,411	$8,243	$7,834

__________

(1)

Software license updates and product support revenues for management reporting include $80 million, $86 million and $243 million of revenues that we did not recognize in the accompanying consolidated statements of operations for fiscal 2011, 2010 and 2009, respectively. 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 amounts of $148 million and $128 million for fiscal 2011 and 2010, respectively. See Note 10 for an explanation of these adjustments and this table for a reconciliation of operating segment revenues to total revenues.

(2)

Represents the effects of fair value adjustments to our inventories acquired from Sun that were sold to customers in the periods presented. Business combination accounting rules require us to account for inventories assumed from our acquisitions at their fair values. The amount included in hardware systems products expenses above is intended to adjust these expenses to the hardware systems products expenses that would have been otherwise recorded by Sun as an independent entity upon the sale of these inventories. If we assume inventories in future acquisitions, we will be required to assess their fair values, which may result in fair value adjustments to those inventories.

Revenue and Long Lived Assets by Geographic Region

	As of and for the Year Ended May 31,
	2011		2010		2009
(in millions)	Revenues	Long Lived Assets(1)	Revenues	Long Lived Assets(1)	Revenues	Long Lived Assets(1)
United States	$15,274	$2,359	$11,472	$2,141	$10,190	$1,466
United Kingdom	2,200	168	1,685	136	1,587	89
Japan	1,731	551	1,349	505	1,189	485
Germany	1,475	29	1,112	20	956	5
Canada	1,174	16	888	10	737	13
France	1,145	15	965	24	856	8
Australia	1,041	34	687	28	517	26
Other countries	11,582	661	8,662	632	7,220	436
Total	$35,622	$3,833	$26,820	$3,496	$23,252	$2,528

 __________

(1) Long-lived assets exclude goodwill, intangible assets, equity investments and deferred taxes, which are not allocated to specific geographic locations as it is impracticable to do so.