SEGMENT INFORMATION

12 Months Ended

May. 31, 2015

Segment Information [Abstract]

SEGMENT INFORMATION

16. SEGMENT INFORMATION

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.

Our new software licenses and cloud software subscriptions line of business markets, sells and delivers our application and platform technologies, including our SaaS and PaaS offerings (our SaaS and PaaS offerings are collectively referred to as cloud software subscriptions), which provide customers a choice of software applications and platforms that are delivered via a cloud-based IT environment that we host, manage and support, and the licensing of our software products including Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others.

The cloud infrastructure as a service line of business provides comprehensive software and hardware management and maintenance services for customer IT infrastructure for a fee for a stated term that is hosted at our Oracle data center facilities, select partner data centers or physically on-premises at customer facilities; 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; and certain of our Oracle Engineered Systems and related support offerings that are deployed in our customers’ data centers for a monthly fee.

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 provides Oracle Engineered Systems, servers, storage, networking, industry specific hardware, virtualization software, operating systems including the Oracle Solaris Operating System and management software to support diverse IT environments, including cloud computing environments.

Our hardware systems support line of business provides customers with software updates for the software components that are essential to the functionality of our hardware 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-premises 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:

	Year Ended May 31,
(in millions)	2015		2014		2013
New software licenses and cloud software subscriptions:
Revenues(1)	$	10,025	$	10,542	$	10,350
Cloud software as a service and platform as a service expenses		742		437		313
Sales and distribution expenses		5,812		5,666		5,227
Margin(2)	$	3,471	$	4,439	$	4,810
Cloud infrastructure as a service:
Revenues	$	608	$	456	$	457
Cloud infrastructure as a service expenses		329		304		296
Sales and distribution expenses		89		61		61
Margin(2)	$	190	$	91	$	100
Software license updates and product support:
Revenues(1)	$	18,858	$	18,209	$	17,156
Software license updates and product support expenses		1,130		1,111		1,120
Margin(2)	$	17,728	$	17,098	$	16,036
Total software and cloud business:
Revenues(1)	$	29,491	$	29,207	$	27,963
Expenses		8,102		7,579		7,017
Margin(2)	$	21,389	$	21,628	$	20,946
Hardware systems products:
Revenues	$	2,825	$	2,976	$	3,033
Hardware systems products expenses		1,465		1,516		1,498
Sales and distribution expenses		864		940		885
Margin(2)	$	496	$	520	$	650
Hardware systems support:
Revenues(1)	$	2,384	$	2,407	$	2,327
Hardware systems support expenses		783		802		857
Margin(2)	$	1,601	$	1,605	$	1,470
Total hardware systems business:
Revenues(1)	$	5,209	$	5,383	$	5,360
Expenses		3,112		3,258		3,240
Margin(2)	$	2,097	$	2,125	$	2,120
Total services business:
Revenues(1)	$	3,553	$	3,716	$	3,930
Services expenses		2,818		2,822		3,051
Margin(2)	$	735	$	894	$	879
Totals:
Revenues(1)	$	38,253	$	38,306	$	37,253
Expenses		14,032		13,659		13,308
Margin(2)	$	24,221	$	24,647	$	23,945

__________

(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 consolidated statements of operations in the amounts of $12 million, $17 million and $45 million for fiscal 2015, 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 consolidated statements of operations in the amounts of $11 million, $3 million and $14 million for fiscal 2015, 2014 and 2013, respectively. 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 $4 million, $11 million and $14 million for fiscal 2015, 2014 and 2013, respectively. See Note 10 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 reported 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:

	Year Ended May 31,
(in millions)	2015		2014		2013
Total revenues for operating segments	$	38,253	$	38,306	$	37,253
Cloud software as a service and platform as a service revenues (1)		(12)		(17)		(45)
Software license updates and product support revenues(1)		(11)		(3)		(14)
Hardware systems support revenues(1)		(4)		(11)		(14)
Total revenues	$	38,226	$	38,275	$	37,180

Total margin for operating segments	$	24,221	$	24,647	$	23,945
Cloud software as a service and platform as a service revenues (1)		(12)		(17)		(45)
Software license updates and product support revenues(1)		(11)		(3)		(14)
Hardware systems support revenues(1)		(4)		(11)		(14)
Product development		(4,812)		(4,590)		(4,321)
Marketing and partner program expenses		(520)		(564)		(591)
Corporate, general and administrative and information technology expenses		(1,496)		(1,384)		(1,421)
Amortization of intangible assets		(2,149)		(2,300)		(2,385)
Acquisition related and other		(211)		(41)		604
Restructuring		(207)		(183)		(352)
Stock-based compensation		(928)		(795)		(722)
Interest expense		(1,143)		(914)		(797)
Non-operating income (expense), net		106		(141)		11
Income before provision for income taxes	$	12,834	$	13,704	$	13,898

__________

(1) New software licenses and cloud software subscriptions revenues, software license updates and product support revenues and hardware systems support revenues for management reporting included revenues that would have otherwise been recorded by our acquired businesses as independent entities but were not recognized in the accompanying consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to footnote one to our business and operating segments summary results table above in this Note 16 for additional information.

Geographic Information

Disclosed in the table below is geographic information for each country that comprised greater than three percent of our total revenues for any of fiscal 2015, 2014 or 2013.

	As of and for the Year Ended May 31,
	2015				2014				2013
(in millions)	Revenues		Long Lived Assets(1)		Revenues		Long Lived Assets(1)		Revenues		Long Lived Assets(1)
United States	$	17,325	$	3,341	$	16,809	$	2,993	$	16,003	$	2,921
United Kingdom		2,388		309		2,309		236		2,165		203
Germany		1,466		33		1,483		35		1,308		44
Japan		1,433		338		1,558		414		1,770		428
Canada		1,286		58		1,190		31		1,232		34
France		1,044		33		1,148		28		1,054		17
Other countries		13,284		1,007		13,778		879		13,648		868
Total	$	38,226	$	5,119	$	38,275	$	4,616	$	37,180	$	4,515

__________

(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.