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 (CODMs) are our Chief Executive Officers and Chief Technology Officer. We are organized by line of business and geographically. While our CODMs 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. In recent periods, customer demand has increased at a greater rate for cloud-based IT deployment models relative to on-premise IT deployment models. Our CODMs view the operating results of our three businesses and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. As a result, during fiscal 2017, we updated our operating segments. The footnote information below presents the financial information provided to our CODMs for their review and assists our CODMs with evaluating the Company’s performance and allocating Company resources.

We have three businesses—cloud and on-premise software, hardware and services—each of which are comprised of a single operating segment.

Our cloud and on-premise software line of business markets, sells and delivers a broad spectrum of applications, platform and infrastructure technologies through our cloud offerings and on-premise software offerings. Our Oracle Cloud SaaS, PaaS and IaaS offerings deliver certain of our applications, platform and infrastructure technologies on a subscription basis via cloud-based deployment models that we host, manage and support. Our IaaS offerings also include Oracle Managed Cloud Services, which are designed to provide comprehensive software and hardware management, maintenance and security services for on-premise, cloud-based or hybrid IT infrastructures. Our cloud and on-premise software business also licenses our software products, generally on a perpetual basis, including Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others, for on-premise and other IT environments. Customers that license our software have the option to purchase software license updates and product support contracts, which provide customers with rights to software product upgrades and maintenance releases, patch releases, internet access to technical content, as well as internet and telephone access to technical support personnel during the support period.

Our hardware business provides Oracle Engineered Systems, servers, storage, industry-specific hardware, virtualization software, operating systems including the Oracle Solaris Operating System and management software to support diverse IT environments. Our hardware business also includes hardware support, which provides customers with software updates for the software components that are essential to the functionality of the hardware products, such as Oracle Solaris and certain other software, and can include product repairs, maintenance services and technical support services.

Our services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications, platform and infrastructure technologies.

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

The following table presents summary results for each of our three businesses for each of fiscal 2017, 2016 and 2015 (fiscal 2016 and 2015 have been recast to conform to the current year’s presentation):

	Year Ended May 31,
(in millions)	2017		2016		2015
Cloud and on-premise software:
Revenues⁽¹⁾	$	30,389	$	28,997	$	29,491
Cloud SaaS, PaaS and IaaS expenses		1,901		1,468		1,072
Software license updates and product support expenses		984		1,077		1,130
Sales and marketing expenses		6,886		6,570		6,398
Margin⁽²⁾	$	20,618	$	19,882	$	20,891
Hardware:
Revenues⁽¹⁾	$	4,152	$	4,669	$	5,209
Hardware products and support expenses		1,623		2,031		2,249
Sales and marketing expenses		820		867		885
Margin⁽²⁾	$	1,709	$	1,771	$	2,075
Services:
Revenues	$	3,358	$	3,391	$	3,553
Services expenses		2,668		2,634		2,810
Margin⁽²⁾	$	690	$	757	$	743
Totals:
Revenues⁽¹⁾	$	37,899	$	37,057	$	38,253
Expenses		14,882		14,647		14,544
Margin⁽²⁾	$	23,017	$	22,410	$	23,709

⁽¹⁾

Cloud and on-premise software and hardware revenues for management reporting included revenues related to cloud, 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 due to business combination accounting requirements. 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 as reported in our 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, general and administrative and certain other allocable expenses. Additionally, the margins reported above 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. Certain fiscal 2016 and fiscal 2015 balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect consolidated revenues or operating income.

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)	2017			2016			2015
Total revenues for operating segments	$	37,899		$	37,057		$	38,253
Cloud and on-premise software revenues⁽¹⁾		(171	)		(9	)		(23	)
Hardware revenues⁽¹⁾		—			(1	)		(4	)
Total revenues	$	37,728		$	37,047		$	38,226

Total margin for operating segments	$	23,017		$	22,410		$	23,709
Cloud and on-premise software revenues⁽¹⁾		(171	)		(9	)		(23	)
Hardware revenues⁽¹⁾		—			(1	)		(4	)
Research and development		(6,159	)		(5,787	)		(5,524	)
General and administrative		(1,176	)		(1,155	)		(1,077	)
Amortization of intangible assets		(1,451	)		(1,638	)		(2,149	)
Acquisition related and other		(103	)		(42	)		(211	)
Restructuring		(463	)		(458	)		(207	)
Stock-based compensation for operating segments		(415	)		(305	)		(258	)
Expense allocations and other, net		(369	)		(411	)		(385	)
Interest expense		(1,798	)		(1,467	)		(1,143	)
Non-operating income, net		605			305			106
Income before provision for income taxes	$	11,517		$	11,442		$	12,834

⁽¹⁾

Cloud and on-premise software and hardware revenues for management reporting included revenues related to cloud, 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 due to business combination accounting requirements. See Note 10 for an explanation of these adjustments and this table for a reconciliation of our total operating segment revenues to our total revenues as reported in our consolidated statements of operations.

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 2017, 2016 or 2015.

	As of and for the Year Ended May 31,
	2017				2016				2015
(in millions)	Revenues		Long-Lived Assets⁽¹⁾		Revenues		Long-Lived Assets⁽¹⁾		Revenues		Long-Lived Assets⁽¹⁾
United States	$	17,770	$	4,680	$	17,264	$	3,646	$	17,325	$	3,341
United Kingdom		1,999		402		2,349		334		2,388		309
Japan		1,618		380		1,465		375		1,433		338
Germany		1,417		116		1,438		40		1,466		33
Canada		1,102		60		1,096		44		1,286		58
Other countries		13,822		1,090		13,435		989		14,328		1,040
Total	$	37,728	$	6,728	$	37,047	$	5,428	$	38,226	$	5,119

⁽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.