COMPANY PROFILE

Oracle Corporation

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Oracle Corporation
TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3 Key Facts...............................................................................................................3 SWOT Analysis.....................................................................................................4

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Oracle Corporation
Company Overview

COMPANY OVERVIEW
Oracle Corporation (Oracle or “the company”) is a provider of enterprise software, computer hardware products and services. The company operates in more than 145 countries across the world. Oracle is headquartered in Redwood Shores, California and employed 120,000 people as of May 31, 2013. The company recorded revenues of $37,180 million during the financial year ended May 2013 (FY2013), an increase of 0.2% over FY2012. The increase in revenues was due to an increase in Oracle’s software business revenues. The operating profit of the company was $14,684 million in FY2013, an increase of 7.1% over FY2012. The net profit was $10,925 million in FY2013, an increase of 9.5% over FY2012.

KEY FACTS
Head Office Oracle Corporation 500 Oracle Parkway Redwood Shores California 94065 USA 1 650 506 7000

Phone Fax Web Address

http://www.oracle.com

Revenue / turnover 37,180.0 (USD Mn) Financial Year End Employees New York Stock Exchange Ticker May 120,000 ORCL

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SWOT Analysis

SWOT ANALYSIS
Oracle Corporation (Oracle or "the company") is a provider of enterprise software, computer hardware products and services. Diversified geographic presence and customer base contributes to Oracle’s consistent organic revenue growth and reduces its dependence on any single country or customer. However, the fierce competition that Oracle faces in all aspects of its business could impact its results of operations and business prospects. Strengths Diversified geographic presence and customer base Strong margins and cash position Inorganic growth strategy Opportunities Increased adoption of cloud computing services Growing enterprise software spending Big data presents growth opportunity Weaknesses Struggling hardware systems business Significant debt obligations

Threats Intense competition Foreign currency risk Civil lawsuit with HP

Strengths

Diversified geographic presence and customer base Oracle has a diversified geographic presence and customer base. The company has strategically expanded its presence across the globe. It operates in more than 145 countries and has been steadily expanding its geographic footprint. In addition to the traditional markets for its services which include North America and Europe, the company has been expanding its presence in emerging markets such as Asia Pacific, Latin America, the Middle East, and Africa. Oracle has a diversified customer base belonging to different end markets. The company serves more than 400,000 customers worldwide operating in various industries, including banking, communications, construction, education, financial services and insurance, life sciences and healthcare, manufacturing, professional services, public sector, and retail and wholesale. In FY2013, the company had 310,000 Oracle database customers; 115,000 Oracle Fusion middleware customers; 85,000 Oracle applications customers, and 2,700 engineered systems customers. Oracle catered to 290,000 midsize customers. Some of the company’s clients include Airbus, BAE Systems, AkzoNobel, Avaya, British Telecom, AT&T, Allianz Group, Banco do Brasil, Banyan Tree Group,

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SWOT Analysis

Apollo Group, Accenture, Atos, BMC Software, Aegion, AstraZeneca, Big Fish, and Brightcove, among others. Diversified geographic presence and customer base contributes to Oracle’s consistent organic revenue growth and reduces its dependence on any single country or customer. In addition, diverse geographic presence allows the company to maintain a strong growth pace in its target markets, driven by attractive market share expansion opportunities and strong underlying market growth characteristics. Strong margins and cash position Oracle enjoys strong margins and cash flow conversion rates. In FY2013, the company's operating margin was 39.5% while its net margin was 29.4%. In addition, Oracle was able to convert 130.2% of its net income into cash from operations. On the other hand, SAP, one of the company’s key competitors, had an operating margin of 26.6% and net margin of 19.8%. Moreover, SAP was able to convert only 115.2% of its net income into cash from operations. The strong cash conversion that Oracle enjoys indicates the inherent strength in the company's business model which is dominated by sticky revenues requiring lower cost of acquisitions and pricing power associated with products that command high switching costs. The company's strong cash flow generation capability supports its growth prospects. Strong cash flows and margins provide resilience to the business operations and reduce vulnerability to market declines. Cash flows enable the company to further finance growth at feasible costs. Inorganic growth strategy The company has undertaken a number of strategic acquisitions in the recent past to diversify its portfolio and enhance footprint. For instance, in October 2013, Oracle acquired BigMachines, a cloud-based configure, price and quote (CPQ) solution provider. This acquisition is expected to enhance Oracle’s cloud offerings. Also, during the same month, the company acquired Compendium, a cloud-based content marketing provider that helps companies plan, produce and deliver content across multiple channels throughout their customers’ lifecycle. Compendium’s solution complements Oracle’s Eloqua Marketing Cloud, which is a part of Oracle’s customer experience solution. In the following month, Oracle acquired Bitzer Mobile, a provider of mobile applications management solutions that allow organizations to provide employees access to corporate data and applications from their mobile devices, to address the growing security needs created by the bring your own device (BYOD) movement. Bitzer Mobile augments Oracle's portfolio of Fusion Middleware products, and is expected to be a core component to its mobile security strategy. Subsequently, in December 2013, the company acquired Responsys, a provider of enterprise-scale cloud-based business-to-consumer (B2C) marketing software. The addition of Responsys extends Oracle’s Customer Experience Cloud, which includes commerce, sales, service, social and the Oracle Marketing Cloud. Further, in January 2014, Oracle entered into an agreement to acquire Corente, a provider of software-defined networking (SDN) technology for wide area networks (WANs). The combination of Oracle and Corente is expected to deliver software-defined networking offerings, delivering a

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SWOT Analysis

technology portfolio for cloud deployments with SDN offerings that virtualize both the enterprise data center LAN and the WAN. In the following month, Oracle signed an agreement to acquire BlueKai, a cloud-based big data platform that enables companies to personalize online, offline and mobile marketing campaigns with information about targeted audiences.This acquisition enhances Oracle’s data driven marketing capabilities. The inorganic growth strategy by the company helps the company strengthens its product portfolio, offers diversification and also increases the customer base of the company. It also helps the company strengthen its market position.

Weaknesses

Struggling hardware systems business The revenues at Oracle’s hardware systems business have fallen every quarter since Oracle closed the acquisition of Sun Microsystems in 2010. In FY2013, Oracle’s hardware systems products revenues decreased by 20.7% compared to the previous year. The decline was primarily due to reductions in sales volumes of certain of the company’s legacy product lines, including lower margin products. Similarly, Oracle’s hardware systems support revenues declined by 7.1% in FY2013 compared to FY2012. Continued decline in the hardware systems business could put pressure on the company’s other profit making businesses, which in turn would impact the company’s topline growth. Significant debt obligations Oracle has a significant outstanding debt obligation. The company recorded a long term debt of $18,494 million in FY2013. Significant debt could force Oracle to allocate a considerable portion of its cash flow from operations towards servicing its debt. It also limits the company's ability to obtain additional financing at feasible rates. High indebtedness requires the company to dedicate a substantial portion of its cash flow from operations for interest and principal payments. This will in turn diminish the company's ability to finance capital expenditures and acquisitions as well as to pursue growth opportunities.

Opportunities

Increased adoption of cloud computing services The worldwide demand for cloud computing services is expected to record strong growth in the coming years. Cloud computing is a computing infrastructure model, which enables delivery of SaaS. The appeal of cloud computing has been increasing as it enables companies to reduce expenses such as upfront royalty or licensing payments, investment in hardware infrastructure and other operating expenses. Consequently, the demand for cloud computing services has been increasing

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SWOT Analysis

and is expected to grow rapidly and cross $241 billion by 2020. In addition, public cloud services market is forecast to grow at a CAGR of 23.5% during 2013-17. The market is expected to be driven by smartphones, tablets and high-speed internet access demand. Oracle has significant presence in the cloud computing market.The company’s offers a broad portfolio of enterprise-grade software and hardware products and services for private and public cloud computing environments. Its cloud offerings include Oracle Cloud, a set of cloud service offerings that is designed to provide customers and partners with access to application services, social services, platform services and common infrastructure services on a subscription basis that Oracle hosts, manages and supports. Oracle Engineered Systems cloud offering includes Oracle Exadata Database Machine, Oracle Exalogic Elastic Cloud, Oracle Exalytics In-Memory Machine, Oracle Database Appliance, Oracle Big Data Appliance, and Oracle SPARC SuperCluster products. In addition, Oracle software product and hardware-related software portfolio includes Oracle Fusion Applications in the cloud; Oracle SOA Suite and Oracle Business Process Management Suite for process integration, Oracle Data Integrator for data integration; Oracle VM for SPARC and x86;; and Oracle Enterprise Manager. In addition to existing cloud offerings, the company expanded its cloud offering through acquisitions in the recent times. For instance, in October 2013, Oracle acquired BigMachines, a cloud-based configure, price and quote (CPQ) solution provider. This acquisition is expected to enhance Oracle’s cloud offerings. During the same month, the company acquired Compendium, a cloud-based content marketing provider that helps companies plan, produce and deliver content across multiple channels throughout their customers’ lifecycle. Compendium’s solution complements Oracle’s Eloqua Marketing Cloud, which is a part of Oracle’s customer experience solution. Compendium’s content marketing platform is expected to help Oracle’s Eloqua Marketing Cloud solution to capture more prospects and improve customer experience. Further, in December 2013, Oracle acquired Responsys, a provider of enterprise-scale cloud-based Business-to-Consumer (B2C) marketing software. The addition of Responsys extends Oracle’s customer experience cloud, which includes commerce, sales, service, social and the Oracle Marketing Cloud. Moreover, Oracle launched several new products to strengthen its cloud offerings. Further in September 2013, the company expanded the Oracle Cloud with new services that give customers access to the Oracle database and Java application server in the cloud, with managed service options and full administrative control. The new Oracle Cloud services include Oracle Database as a Service, Oracle Java as a Service, and Oracle Infrastructure as a Service, and augment Oracle’s portfolio of application, social, platform, and infrastructure services. During the same month, Oracle launched the Oracle Cloud Marketplace, which enables Oracle Cloud customers to browse, evaluate, and buy trusted business applications. Leveraging Oracle Cloud Platform Services, Oracle partners can build applications, extend and integrate with Oracle SaaS applications, and publish their applications on the Oracle Cloud Marketplace to reach Oracle customers. Furthermore, the company expanded its investment in global cloud infrastructure by adding new data centers in Canada and Germany, bringing the total to 17 data centers worldwide. Increasing adoption of cloud computing services and the company’s strong portfolio of cloud products and services coupled with continued focus on expanding its cloud offerings will provide Oracle an opportunity to gain new customers and increase its revenues.

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SWOT Analysis

Growing enterprise software spending The enterprise software spending is expected to grow rapidly in the coming years. According to industry estimates, the worldwide enterprise software spending is expected to reach $320 billion in 2014, representing an increase of 6.8% from 2013. This growth is expected to be driven by key markets such as supply chain management and customer relationship management. Also, growing adoption of on-premises and SaaS will further drive a modest increase in worldwide software spending through 2014. Oracle offers a broad portfolio of supply chain management applications that customers can adopt as an entire suite or individual applications, including value chain planning, value chain execution, product lifecycle management, asset lifecycle management, order orchestration and fulfillment and manufacturing solutions.The company also offers customer experience software solutions, including customer relationship management. Oracle provides customer experience solutions for commerce, loyalty and marketing, service and support, integrated sales and marketing, social, insight and industry requirements. Oracle with its robust enterprise software portfolio coupled is well positioned to enhance its revenues and market share in the coming period. Big data presents growth opportunity Big Data, which is a primary contributor to the pace of overall data growth, refers to the large repositories of corporate and external data, including unstructured information created by new applications, including medical, entertainment, energy and geophysical, social media and other web repositories. It also refers to the new analytics and other technologies that are available to help people do things with the significant amount of enterprise and external data. According to industry estimates, the total amount of digital information is expected to reach 40 zettabytes by 2020. Also, the global big data market is expected to reach $48.3 billion by 2018, growing at a CAGR of more than 40% for the 2012-18 periods. Moreover, 70% of enterprise organizations would have either deployed or are planning to deploy big data-related projects and programs in 2014. The company is keen to take advantage of this growth opportunity. Oracle offers products to address enterprise big data requirements, including embedded Java, Oracle NoSQL Database and MySQL products for acquiring big data; Oracle Big Data Appliance and Oracle Data integrator to organize big data; and Oracle Advanced Analytics database option, Oracle Exadata Database Machine, and Oracle Exalytics In-Memory Machine to analyze big data. The company’s strong presence, increased focus, and the positive outlook for the end market provide it with an opportunity to gain more customers and increase its revenues in future.

Threats

Intense competition

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SWOT Analysis

The company faces intense competition in all aspects of its business. Evolving technology and customer demands have been constantly changing the competitive landscape. Key competitive factors in each of the segments in which the company currently competes include total cost of ownership, performance, scalability, reliability, security, functionality, efficiency, ease of management and quality of technical support. Oracle’s enterprise software and hardware offerings compete directly with the offerings from some of the largest and highly competitive companies in the world, including Microsoft, IBM, Intel, HP and SAP, and smaller companies like salesforce.com, as well as many others. The company’s hardware systems business competes with, among others, systems manufacturers and resellers of systems; microprocessor/chip manufacturers; and providers of storage products. In addition, the low barriers to entry in many of the company’s market segments regularly introduce new technologies and new and growing competitors to challenge its offerings. Oracle’s competitors range from companies offering broad IT solutions across many of its lines of business to vendors providing point solutions, or offerings focused on a specific functionality, product area or industry. Moreover, several products launched by many of the company's competitors pose a threat to Oracle's dominant position in several specific product lines. Therefore, technology markets are associated with low barriers to entry and rapid advancements which give rise to many competitive products with the potential to effectively reduce Oracle's dominant position. Intense competition from existing and new hardware systems or software competitors could impact Oracle’s results of operations and business prospects through fewer customer orders, reduced pricing, lower revenues or lower profits. Foreign currency risk Oracle’s revenue and operating income are subject to variability due to the effects of foreign currency fluctuations against the US dollar. The primary currencies to which the company is exposed include the Euro, Japanese Yen and British Pound. The company derives a significant portion of its revenue and operating income outside the US, and therefore its financial results may fluctuate due to the effects of such foreign currency fluctuations. For instance, during FY2013 and FY2010, Oracle incurred foreign currency losses associated with its Venezuelan subsidiary due to it being designated as operating in a highly inflationary economy and due to the subsequent devaluation of the Venezuelan Bolivar relative to the US Dollar. The company could experience similar foreign currency volatility in the future if the Venezuelan government further devalues the Venezuelan currency, the amounts and timing of which are uncertain. In addition, currency variations could impact margins on sales of the company’s products in countries outside of the US and margins on sales of products that include components obtained from suppliers located outside of the US. Civil lawsuit with HP Oracle has been involved in a civil lawsuit with Hewlett-Packard (HP). In 2011, HP filed a lawsuit against the company, which claimed that Oracle had breached an agreement to support the Itanium microprocessor (developed by Intel) used in HP's high-end enterprise servers. Earlier in 2011, Oracle announced that its new versions of software would not run on HP’s Itanium-based server platforms,

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SWOT Analysis

and that it would discontinue all software development for platforms using the Itanium microprocessor. Oracle alleged that HP had secretly agreed to pay Intel to continue to develop and manufacture the Itanium microprocessor, and had misrepresented to customers that the Itanium microprocessor had a long roadmap, among other claims. In the third quarter of 2012, the US court found that Oracle had breached its contract. It issued a proposed ruling of the first phase of HP’s trial against Oracle and confirmed the existence of a contract between HP and Oracle that required Oracle to continue to port its software products to HP’s platforms. Subsequently, Oracle filed its appeal of that ruling. The trial is stayed pending Oracle’s appeal of the court’s denial of its anti-SLAPP motion. Whether Oracle breached the contract and if so, what damages and/or remedies HP would be entitled to receive as a result. According to industry estimates, HP is preparing to claim up to $4 billion from Oracle for the damages that caused to its high-end server business. Any negative outcome of this trial against the company could result in heavy penalties, which could dent the company’s financial results and reputation.

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