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 makers are our Chief Executive Officers. We are organized geographically and by line of business. While our Chief Executive Officers evaluate 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.

We have three businesses—software and cloud, hardware systems and services—which are further divided into certain operating segments. Our software and cloud business is comprised of three operating segments: (1) new software licenses and cloud software subscriptions, which includes our cloud SaaS and PaaS offerings, (2) cloud infrastructure-as-a-service and (3) 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. All other operating segments are combined under our services business.

The new software licenses and cloud software subscriptions line of business is engaged in the licensing of our database and middleware software, as well as our application software, and providing access to a broad range of our software through Oracle Cloud SaaS and PaaS offerings on a subscription basis via a cloud-based IT environment that we manage, host and support.

The cloud infrastructure-as-a-service line of business provides deployment and management offerings for our software and hardware and related IT infrastructure including virtual machine instances that are subscription-based and designed for computing and reliable and secure object storage; Oracle Engineered Systems hardware and related support that are deployed in our customers’ data centers for a monthly fee; and comprehensive software and hardware management and maintenance services for customer IT infrastructure for a fee for a stated term that is hosted at our data center facilities, select partner data centers or physically on-premise at customer facilities.

The software license updates and product support line of business provides customers with rights to software product upgrades and maintenance releases, patches released, 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 servers, storage, networking, virtualization software, operating systems including the Oracle Solaris Operating System and management software to support diverse IT environments, including cloud computing environments. As a part of this line of business, we offer our Oracle Engineered Systems, including our Oracle Exadata Database Machine, among others.

Our hardware systems support line of business provides customers with software updates for the software components that are essential to the functionality of our server and storage products, such as Oracle Solaris and certain other software products, and can include product repairs, maintenance services and technical support services.

Our services business is comprised of the remainder of our operating segments and offers consulting, advanced customer support services and education services. Our consulting line of business primarily provides services to customers in business and IT strategy alignment, enterprise architecture planning and design, initial product implementation and integration and ongoing product enhancements and upgrades. Advanced customer support provides support services, both on-premise and remote, to our customers to enable increased performance and higher availability of their products and services. Education services provide training to customers, partners and employees as a part of our mission of accelerating the adoption and use of our software and hardware products and to create opportunities to grow our product revenues.

We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segment.

The following table presents summary results for each of our three businesses and for the operating segments of our software and cloud and hardware systems businesses:

	Three Months Ended August 31,
(in millions)	2014		2013
New software licenses and cloud software subscriptions:
Revenues⁽¹⁾	$	1,707	$	1,653
Cloud software-as-a-service and platform-as-a-service expenses		143		95
Sales and distribution expenses		1,279		1,178
Margin⁽²⁾	$	285	$	380
Cloud infrastructure-as-a-service:
Revenues	$	138	$	109
Cloud infrastructure-as-a-service expenses		76		67
Sales and distribution expenses		18		20
Margin⁽²⁾	$	44	$	22
Software license updates and product support:
Revenues⁽¹⁾	$	4,731	$	4,432
Software license updates and product support expenses		257		276
Margin⁽²⁾	$	4,474	$	4,156
Total software and cloud business:
Revenues⁽¹⁾	$	6,576	$	6,194
Expenses		1,773		1,636
Margin⁽²⁾	$	4,803	$	4,558
Hardware systems products:
Revenues	$	578	$	669
Hardware systems products expenses		297		329
Sales and distribution expenses		201		217
Margin⁽²⁾	$	80	$	123
Hardware systems support:
Revenues⁽¹⁾	$	588	$	597
Hardware systems support expenses		184		201
Margin⁽²⁾	$	404	$	396
Total hardware systems business:
Revenues⁽¹⁾	$	1,166	$	1,266
Expenses		682		747
Margin⁽²⁾	$	484	$	519
Total services business:
Revenues⁽¹⁾	$	857	$	921
Services expenses		665		687
Margin⁽²⁾	$	192	$	234
Totals:
Revenues⁽¹⁾	$	8,599	$	8,381
Expenses		3,120		3,070
Margin⁽²⁾	$	5,479	$	5,311

__________

(1)

New software licenses and cloud software subscriptions revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $2 million and $3 million for the three months ended August 31, 2014 and 2013, respectively. Software license updates and product support revenues for management reporting included revenues related to software support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August, 31 2013. In addition, we did not recognize hardware systems support revenues related to hardware systems support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amounts of $1 million and $5 million for the three months ended August 31, 2014 and 2013, respectively. See Note 8 for an explanation of these adjustments and the table below for a reconciliation of our total operating segment revenues to our total revenues. Our new software license and services revenues for management reporting also differ from amounts reported per our consolidated statements of operations for the periods presented due to certain insignificant reclassifications between these lines for management reporting purposes.

(2)

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

The following table reconciles total operating segment revenues to total revenues as well as total operating segment margin to income before provision for income taxes:

	Three Months Ended August 31,
(in millions)	2014		2013
Total revenues for operating segments	$	8,599	$	8,381
Cloud software-as-a-service and platform-as-a-service revenues ⁽¹⁾		(2)		(3)
Software license updates and product support revenues⁽¹⁾		—		(1)
Hardware systems support revenues⁽¹⁾		(1)		(5)
Total revenues	$	8,596	$	8,372

Total margin for operating segments	$	5,479	$	5,311
Cloud software-as-a-service and platform-as-a-service revenues ⁽¹⁾		(2)		(3)
Software license updates and product support revenues⁽¹⁾		—		(1)
Hardware systems support revenues⁽¹⁾		(1)		(5)
Product development		(1,174)		(1,094)
Marketing and partner program expenses		(119)		(131)
Corporate, general and administrative and information technology expenses		(367)		(345)
Amortization of intangible assets		(547)		(595)
Acquisition related and other		(25)		(10)
Restructuring		(69)		(56)
Stock-based compensation		(212)		(198)
Interest expense		(261)		(217)
Non-operating income, net		16		7
Income before provision for income taxes	$	2,718	$	2,663

__________

(1)

New software licenses and cloud software subscriptions revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $2 million and $3 million for the three months ended August 31, 2014 and 2013, respectively. Software license updates and product support revenues for management reporting included revenues related to software support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August 31, 2013. In addition, we did not recognize hardware systems support revenues related to hardware systems support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amounts of $1 million and $5 million for the three months ended August 31, 2014 and 2013, respectively. See Note 8 for an explanation of these adjustments.