12.	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—cloud and on-premise software, hardware and services—which are further divided into certain operating segments. Our cloud and on-premise software business is comprised of three operating segments: (1) cloud software and on-premise software, which includes our cloud SaaS and PaaS offerings, (2) cloud infrastructure as a service and (3) software license updates and product support. Our hardware business is comprised of two operating segments: (1) hardware products and (2) hardware support. All other operating segments are combined under our services business.

Our cloud software and on-premise software line of business markets, sells and delivers a broad spectrum of application and platform technologies through our SaaS and PaaS offerings, which are certain of our applications and platforms software delivered via a cloud-based information technology (IT) environment that we host, manage and support, and through the licensing of our software products including Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others.

The cloud IaaS line of business includes Oracle Cloud IaaS offerings, which provide infrastructure cloud services that are enterprise-grade, hosted and supported within the Oracle Cloud to perform elastic compute, storage and networking services on a subscription basis; and Oracle Managed Cloud Services, which are comprehensive software and hardware management and maintenance services for customer IT infrastructure for a fee for a stated term that are hosted at our Oracle data center facilities, select partner data centers or physically on-premise at customer facilities.

The software license updates and product support line of business generates revenues through the sale of software support contracts related to new software licenses purchased by our customers. The software license updates and product support line of business provides our on-premise software 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 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 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, 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 services provides on-premise and remote support services to our customers to enable increased performance and higher availability of their Oracle products and services and also include certain other services. Education services provide training to customers, partners and employees as a part of our mission of accelerating the adoption and use of our cloud, on-premise software and hardware offerings.

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 cloud and on-premise software and hardware businesses:

	Three Months Ended August 31,
(in millions)	2016			2015
Cloud software and on-premise software:
Revenues⁽¹⁾	$	1,845		$	1,603
Cloud software as a service and platform as a service expenses		308			268
Sales and distribution expenses		1,580			1,395
Margin⁽²⁾	$	(43	)	$	(60	)
Cloud infrastructure as a service:
Revenues	$	171		$	160
Cloud infrastructure as a service expenses		93			85
Sales and distribution expenses		16			22
Margin⁽²⁾	$	62		$	53
Software license updates and product support:
Revenues⁽¹⁾	$	4,793		$	4,697
Software license updates and product support expenses		257			271
Margin⁽²⁾	$	4,536		$	4,426
Total cloud and on-premise software business:
Revenues⁽¹⁾	$	6,809		$	6,460
Expenses		2,254			2,041
Margin⁽²⁾	$	4,555		$	4,419
Hardware products:
Revenues	$	462		$	570
Hardware products expenses		240			301
Sales and distribution expenses		203			204
Margin⁽²⁾	$	19		$	65
Hardware support:
Revenues⁽¹⁾	$	534		$	559
Hardware support expenses		141			172
Margin⁽²⁾	$	393		$	387
Total hardware business:
Revenues⁽¹⁾	$	996		$	1,129
Expenses		584			677
Margin⁽²⁾	$	412		$	452
Total services business:
Revenues	$	808		$	862
Services expenses		665			678
Margin⁽²⁾	$	143		$	184
Totals:
Revenues⁽¹⁾	$	8,613		$	8,451
Expenses		3,503			3,396
Margin⁽²⁾	$	5,110		$	5,055

⁽¹⁾

Cloud software and on-premise software, software license updates and product support and hardware support revenues for management reporting included revenues related to cloud SaaS and PaaS, software support and hardware support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented. 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 as reported in our condensed consolidated statements of operations.

⁽²⁾

The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, corporate, general and administrative and IT 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 non-operating income, 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)	2016			2015
Total revenues for operating segments	$	8,613		$	8,451
Cloud software as a service and platform as a service revenues⁽¹⁾		(17	)		(1	)
Software license updates and product support revenues⁽¹⁾		(1	)		(1	)
Hardware support revenues⁽¹⁾		—			(1	)
Total revenues	$	8,595		$	8,448

Total margin for operating segments	$	5,110		$	5,055
Cloud software as a service and platform as a service revenues⁽¹⁾		(17	)		(1	)
Software license updates and product support revenues⁽¹⁾		(1	)		(1	)
Hardware support revenues⁽¹⁾		—			(1	)
Product development		(1,276	)		(1,188	)
Corporate, general and administrative and information technology expenses		(432	)		(394	)
Amortization of intangible assets		(311	)		(452	)
Acquisition related and other		(14	)		(31	)
Restructuring		(99	)		(83	)
Stock-based compensation		(319	)		(250	)
Interest expense		(416	)		(374	)
Non-operating income, net		148			30
Income before provision for income taxes	$	2,373		$	2,310

⁽¹⁾

Cloud SaaS and PaaS revenues, software license updates and product support revenues and hardware 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 our condensed consolidated statements of operations for the periods presented due to business combination accounting requirements.