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Econ 118: Financial Accounting and Data Analysis O racle

Econ 118: Financial Accounting and Data Analysis O racle Chris Luxford, Steffen Neumaier, Daniel Netzer, Stephan Senfle, Rashad Taylor, Carin Wikstrand Santa Barbara, November 29, 2012. Oracle Overview . Brand Reputation: v More than 380,000 customers—including 100 of the Fortune 100

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Econ 118: Financial Accounting and Data Analysis O racle

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  1. Econ 118: Financial Accounting and Data Analysis Oracle Chris Luxford, Steffen Neumaier, Daniel Netzer, Stephan Senfle, Rashad Taylor, Carin WikstrandSanta Barbara, November 29, 2012

  2. Oracle Overview • Brand Reputation: • vMore than 380,000 customers—including 100 of the Fortune 100 • Deployments across a wide variety of industries in more than 145 countries • around the globe • v Ranked 4th as most admired software company, 82nd on Fortune 500 List • v23rd – Bloomberg Business Week – The 100 Top Brands Multinational computer technology and business software corporation Founded in 1977 by Larry Ellison, Bob Miner, & Ed Oates Consumer satisfaction: Two main fields: Computer hardware systems and enterprise software products – especially database management systems ECON118: Financial Data Analysis Oracle Corp.

  3. Corporate LeadershipTop Management Team Lawrence J. Ellison • Co-founder, CEO since the beginning • Chairman from 1990-2004 • America’s 3rd Richest Man • Drop-Out University of Chicago • Drop-Out University of Illinois at Urbana Jeffrey O. Henley • Chairman of Oracle Corporation since 2004 • CFO and Exec. VP March 1991 - July 2004 • Board of Directors Since June 1995 • BA in Economics from UCSB • MBA in Finance from UCLA Safra A. Catz • President and Chief Financial Officer • Held prior position as Executive and Senior VP • Appointed as Director of HSBC Holdings • BA and JD from the University of Pennsylvania ECON118: Financial Data Analysis Oracle Corp.

  4. Product Portfolio and Selected Customers Oracle Cloud • Service • Applications • Enterprise Resource Planning (ERP) • Supply Chain Management (SCM) • Customer Relationship Management (CRM) Tools for database development • Database Management Systems • Infrastructure, Server • “Hardware and Software, Engineered to Work Together.” Selected customers of MySQLand Java Programming Language ECON118: Financial Data Analysis Oracle Corp.

  5. Stock price development and ownership CAGR 11.2% Oracle‘s stock price outperformed the market in the past The shareholder structure guarentees stability and innovativeness ECON118: Financial Data Analysis Oracle Corp.

  6. Development of SalesBusiness and geographical segments Revenue split by geography FY May, 2012 CAGR 6Yr: 12.8% Sales [US$m] 17,996 22,430 23,252 26,820 26,820 37,121 35,622 Historical growth of business segments ECON118: Financial Data Analysis Oracle Corp.

  7. Liquidity Ratios Cash Flow Liquidity Ratio Over the course of the last four years, Oralce‘s liquidity ratios have constantly been higher than their peers Despite Oracle faced a dip due to macroeconomic headwinds in 2010, the company could quickly recover and increase their liquidity position, which adds safety for investors Current Ratio ECON118: Financial Data Analysis Oracle Corp.

  8. Activity Ratios Despite Oracle‘s average collection period days supply in inventories are best-in-class, the cash conversion cycle could only be maintained – not reduced Reasons: v Acquisition of the hardware business and, subsequently, new inventories v Early payment of creditors Cash conversion cycle and activity ratios ECON118: Financial Data Analysis Oracle Corp.

  9. Solvency Ratios Long Term Capitalization Oracle‘s leverage is notably lower than the one of the competitors, which decreases the risk investors face The share of Oracle‘s outstanding debt with longer durations is very high. This decrease short-term liquidity and refinancing risks. Moreover, a higher share of debt in long term financing decreases the overall capital costs as the cost of debt is lower than the cost of equity Debt-to-Equity ECON118: Financial Data Analysis Oracle Corp.

  10. Profitability Ratios Operating profit margin Net profit margin Gross profit margin ECON118: Financial Data Analysis Oracle Corp.

  11. Market ratios • Dividend payout and share repurchase • P/E ratio Annual appreciation rate of stock prices ECON118: Financial Data Analysis Oracle Corp.

  12. Activity in Merger & AcquisitionsOracle grew externally and spent US$40.5bn on acquisitions since 2005 Breakdown of acquisitions Number of deals Sector 28 Industry Solutions 23 Applications 22 Middleware 9 Database 5 Servers, Storage, Networking Oracle‘s acquisitions enabled external growth, diversification and innovation ECON118: Financial Data Analysis Oracle Corp.

  13. Tax Management PAY YOUR TAXES! Oracle’s effective income tax is significantly below 35% p.a. for the following reasons: vEarnings indefinitely invested in foreign operations vU.S Production activity deduction ECON118: Financial Data Analysis Oracle Corp.

  14. Employee Benefits - ORACLEflex Medical Coverage Plans – Employee and Immediate Family Dental Coverage Plans Vision Coverage Plans – Covers Eye Exams, Glasses, Contacts Life Insurance 401 (k) Plan Employee Stock Purchase Plan Paid Vacation Education/Tuition Reimbursement Plan Commuter Benefit Program ECON118: Financial Data Analysis Oracle Corp.

  15. Interview with Oracle Employee Overall good morale Child Care/ Schooling Paid Gym memberships (incentives to stay fit) Incentives for learning/furthering education Eye Care Benefit Gas allowance • Compensation – above other software firms Matt Rassmusen Enterprise Sales Manager –West and Key Account Director ECON118: Financial Data Analysis Oracle Corp.

  16. Risk factors Motives Description General risk factors Economic • Oracle – and the company‘s clients – are exposed to the general macroeconomic risks (growth/recessions, FX risk) • Oracle cooperates with a small number of third party manufacturers, which increases the exposure to these companies • However, Oracle benefits from synergiesdue to close cooperation Third party manucaturers • Litigations risk and lawsuits • Losing key employees • Competition Other Software specific Cyber attacks • Hackers could attack Oracle‘s servers and software Intellectual property rights • Theft of intellectual property • Piracy of licenses • Intellectual property regulation varies across international legislations ECON118: Financial Data Analysis Oracle Corp.

  17. Outlook and Future Development Long-term contracts for support and updates v Stable, continuous cash inflows Research and development v Improve existing software and hardware products v Develop new products Enter new markets with v More integrated products (hardware and software) v Cloud software Additional strategic acquisitions v Strengthening of competitive position v Product enhancement v Expanded customer base v Accelerate growth v Foster innovation ECON118: Financial Data Analysis Oracle Corp.

  18. Why Oracle? • Two word – GUARANTEED RETURNS! • v Oracle is so massively widespread and deeply embedded • into the backbones of the companies that use Oracle • products that Oracle is here to stay • Oracle products used by all Fortune 100 companies •  Oracle is about as recession proof as breathable air • v Larry Ellison is CEO and majority shareholder • Thus Oracle has firm and stable leadership • v Investing in Oracle is virtually as risk free as investing in Government bonds – only much more profitable • Game Industry companies though are much riskier investments • v Game Industry is highly competitive • Consumers go for the top games • Hence most consumers will be repeat customers only if company continues to produce the “latest and greatest” games • v Games are luxury entertainment items • Hence the Game Industry is susceptible to recessions • v Vivendi, the 61% majority shareholder of Activision-Blizzard, is looking to sell its entire stake in the company • The future of Activision-Blizzard is uncertain • Makes for a risky investment ECON118: Financial Data Analysis Oracle Corp.

  19. Thankyouforyourattention!

  20. Appendix DeferredTaxes – EmployeeCompensationandBenefits Financial overview DeferredTaxes Quarterly development of revenues by segment Financial ratios Balance sheet – Assets Income statement Cash flow statement Balance sheet – Liabilities ECON118: Financial Data Analysis Oracle Corp.

  21. ECON118: Financial Data Analysis Oracle Corp.

  22. Quarterly development of revenues by segment ECON118: Financial Data Analysis Oracle Corp.

  23. ECON118: Financial Data Analysis Oracle Corp.

  24. ECON118: Financial Data Analysis Oracle Corp.

  25. ECON118: Financial Data Analysis Oracle Corp.

  26. ECON118: Financial Data Analysis Oracle Corp.

  27. ECON118: Financial Data Analysis Oracle Corp.

  28. ECON118: Financial Data Analysis Oracle Corp.

  29. Employee Compensation and BenefitsDeferred Taxes (in US$ millions) ECON118: Financial Data Analysis Oracle Corp.

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