So let's get started. Good morning, ladies and gentlemen. I'm Jeff Henley, Vice Chairman of the Board of Directors, and it's my pleasure to welcome order the 39th Annual Meeting of Stockholders of Oracle Corporation. Each stockholder was given an agenda for today's meeting.
We will first conduct the formal portion of the stockholders' meeting in accordance with this agenda. Following the adjournment of the formal portion, I will give a short presentation and then there will be an opportunity for questions and discussion. Before proceeding to the business of the meeting, I'd like to make introductions. So let me first introduce myself and the other directors who are standing for election. As I mentioned, my name is Jeff Henley.
I've been Director since 1995 and Vice Chairman since 2014. Prior to that I served as Chairman and then previously I served as Oracle's Chief Financial Officer from 1991 to 2004. Larry Ellison was appointed Chairman of the Board and Chief Technology Officer in 2014. Previously, Mr. Ellison was our CEO and has been a Director since he founded Oracle in 1977.
Safra Katz has been a Director since 2001 and was appointed CEO of Oracle in 2014. Prior to that, Ms. Katz served as President and Chief Financial Officer. Mark Hurd has been a Director since 2010 and appointed CEO of Oracle in 2014. Previously, Mr.
Hurd served as President of Oracle. Before joining Oracle, he was Chairman and CEO of Hewlett Packard Company. Doctor. Michael Boskin has been a Director since 1994. Doctor.
Boskin is the Tully M. Friedman Professor of Economics and Hoover Institution Senior Fellow at Stanford University. Jeff Berg has been a Director since 1997. He is currently Chairman of Northside Services LLC, a talent and literary agency. Mr.
Berg was formerly Chairman and CEO of International Creative Management Inc. Hector Garcina Molina has been a Director since 2,001. He is the Leonard Vossek and Sandra Lerner Professor in Departments of Computer Science and Electrical Engineering at Stanford University. Ray Bingham has been a Director since 2002. He is Executive Chairman of Cypress Semiconductor Corporation and an Advisory Director at Riverwood Capital Management.
He previously served as CEO of Cadence Design Systems. Naomi Seligmann has been a Director since 2005. She is currently a senior partner Osterker von Simsen, a technology research firm that chairs the CIO Strategy Exchange. George Konradis has been a Director since 2,008. He is Chairman of Akamai Technologies Inc.
And previously served as Akamai's CEO. Roos Chizen has been a Director since 2,008. He is an independent consultant and serves as Senior Advisor to Premier Advisors and as a venture capital partner at Voyeur Capital. He previously served as CEO of Adobe Systems Incorporated. Leon Panetta has been a Director since 2015.
Secretary Panetta previously served as the U. S. Secretary of Defense and as Director of Central Intelligence Agency. He is the Co Founder and Chairman of the Panneta Institute For Public Policy. Renee James has been a Director since 2015.
She is currently an operating executive at the Carlyle Group. She recently concluded a 28 year career at Intel Corporation where she most recently served as President. Seated next to me is Dorian Daly, Oracle's General Counsel and Secretary. Also present today are Kevin Asher, Chris Anger and Andrew Kaven from Ernst and Young LLP, our independent registered accounting firm. Prior to this meeting, we asked if ENY wish to make any statements at today's meeting.
ENY indicated that while they will not make a formal presentation, they would be glad to respond to any questions during the question and answer period. Finally, we are represented we are being assisted today by Joshua McGinn, a representative of American Stock Trust and Transfer Company LLC, our Inspector of Elections and in the tabulation of the proxies and ballots. The minutes of last year's annual meeting are available and any stockholder wishing to inspect the minutes should contact our corporate secretary. So now let's move on to the formal portion of the meeting. Dorian Daly will report on the mailing of the notice of this meeting.
Mr. Vice Chairman, this meeting is held pursuant to a notice dated September 23, 2016. On or about September 23, 2016, each stockholder of record as of the close of business on September 19, 2016 was sent either a notification of Internet availability of proxy materials or the notice itself. All documents concerning notice of the meeting will be filed with the records of the meeting. A proof of mailing and a list of stockholders entitled to vote are both available for inspection by any stockholder wishing to do so.
Gedorian will now advise whether a quorum is present at the meeting and canvas the stockholders present. Those stockholders who have returned proxies have authorized the persons identified in the proxies to vote on the proposals coming before the meeting?
On the record date, there were 4,105,000,000,644,000 and 677 shares of Oracle's common stock issued outstanding and entitled to vote at this meeting. A majority of these shares is present in person or by proxy, If you have a proxy to be voted at this meeting that has not been delivered to the Inspector of Elections, you should register your name with the monitors and show them the proxy. If you have submitted a proxy, but now wish to withdraw that proxy and submit a new proxy or vote in person, you should register with the monitors if you have not already done so. If you have not submitted a proxy and you wish to vote in person, you should now register with the monitors if you have not already done so. The polls are now open.
Please raise your hand if you need to register your name with the monitors, or if you require any assistance with your ballot or your proxy. The polls will close at the conclusion of the formal portion of the meeting, so please be sure to register with the monitors and hand in your ballot or proxy prior to the conclusion of the formal portion of this meeting.
Thanks, Dorian. I hereby declare a quorum as present at this meeting. On behalf of the Board of Directors of Oracle, I'd like to express my appreciation to all stock holders who returned their proxies or submitted ballots. There are 4 items of business on the agenda for this year's meeting. 3 management proposals and 1 stockholder proposal.
All voting results announced today are preliminary final vote totals for each of the proposals voted upon today will be made publicly available within the next few days. So we'll start with the management proposals. The first matter of business is the election of 13 directors to serve until the next Annual Meeting of Stockholders. The nominees recommended by the Board Hector Garcia Molina, Ray Bingham, Naomi Hector Garcina Molina, Ray Bingham, Naomi Seligman, George Conratis, Bruce Chizen, Leon Panetta and Renee James. Additional information about each of the nominees can be found on Pages 7 through 12 of Oracle's proxy statement.
Will the secretary now announce the results of the vote?
Each nominee for election to the Board of Directors Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
I hereby declare that all the nominees for Director have been duly elected. The next item of business is the non binding advisory vote by stockholders on the compensation paid to Oracle's named executive officers as disclosed in Oracle's proxy statement filed in connection with this meeting. This is commonly referred to as say on pay vote. Will the Secretary please indicate the results of the voting?
Based on preliminary voting results, we currently believe that this proposal did not receive the affirmative vote of a majority of Oracle's outstanding shares of common stock present and I'm entitled to vote at this meeting. The final vote results for all proposals will be made publicly available within the next few days.
Thank you. The nonbinding advisory vote on Oracle's compensation program for executive officers is hereby noted. The next matter is the ratification of the appointment of Ernst and Young LLP as Oracle's independent registered public accounting firm by the Finance and Audit Committee of the Board of Directors. The Board of Directors recommends the ratification of the appointment of Ernst and Young as our independent registered public accounting firm for fiscal year 2017. Will the secretary now announce the results of the vote?
This proposal received the affirmative vote of a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
Okay. The appointment of Ernst and Young as Oracle's independent registered public accounting firm for fiscal year 2017 has been duly ratified. The next item of business is the proposal submitted by Boston Common Asset Management LLC, a stockholder of Oracle. It is co sponsored by the Unitarian Universalist Association, the Sisters of St. Joseph of Boston, the First Presbyterian Church of Palo Alto and the First Affirmative Financial Network LLC acting on behalf of Marie Dupree.
The proposal, which appears on Page 60 of Oracle's proxy statement requests that the Board authorize the preparation of an annual report disclosing certain information regarding lobbying policies and payments. We understand that Colin Muehl will represent Boston Common Asset Management at this meeting as Mr. Muir present. Okay. So pursuant to the rules of the conduct for the meeting you will have up to 5 minutes to present the proposal and move for its adoption,
okay. Thank you. Good morning. Boston Common Asset Management is a global investment manager that specializes in sustainable and responsible global equity strategies, and we are long term shareholders in Oracle. As shareholders, we encourage transparency and accountability in our company's use of corporate funds influence legislation and regulation.
Corporate Board member opinion and the regulatory environment related to political and lobbying disclosure is rapidly evolving. Although some companies disclose corporate political spending voluntarily, a majority, 53 percent of public company board members believe that the Securities and Exchange Commission needs to develop mandatory disclosure rules for corporate political contributions. Oracle does not currently disclose its membership in or payments to trade associations or the portion of such amounts used for lobbying. Oracle is listed as a member of the Business Roundtable, which spent more than $34,000,000 in lobbying for 2014 2015. Oracle spent $15,280,000 in 2014 2015 on federal lobbying according to Open Secrets.
These figures do not include lobbying expenditures to influence legislation in states where Oracle also lobbies, but disclosures uneven or absent. Oracle lobbied in 35 states from 2010 to 2014. At present, Oracle lags many of its peers, which disclose some sort of trade association information, including Accenture, Amazon, Apple, Cisco Systems, eBay, Google, HP, IBM and Texas Instruments. In particular, EMC, Intel, Microsoft and Qualcomm disclose all trade association payments and all payments used for lobbying. The proxy agent ISS recommends a vote in favor of our proposal as, quote, additional information regarding the company's lobbying expenditures and trade association activities and oversight mechanisms, which would aid investors in assessing the company's management of related risks and benefits.
Our request for disclosure is a call for transparency and accountability in the spending of shareholder resources. Lobbying is shareholders' money that is being spent. Shouldn't our company tell us where they are spending it? We call on Oracle today to adopt a comprehensive approach to lobbying disclosure and follow the best practice model many of its peers have already adopted. When corporate lobbying and political contributions take place in the dark, it's not only shareholder value that's put at risk, democracy itself is also weakened.
And when that happens, we all lose. Thank you.
Thank you. The Board opposes the adoption of this proposal for the reasons described in pages 60 to 61 of Oracle's proxy statement. Will the Secretary now announce the results of the vote?
This stockholder proposal was defeated by a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
I hereby declare that the stockholder proposal regarding a lobbying report has been defeated. So this concludes the formal part of the meeting. I hereby declare that the formal part of this annual meeting is adjourned and the polls are now closed. So I will now give a brief business overview of Oracle. Before moving on, the Secretary will read our Safe Harbor statement.
Today's discussion may include expectations, predictions, estimates or other information that might be considered forward looking. While these forward looking statements represent our current judgment on what the future holds, they're subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we're not obligating ourselves to revise or publicly release the results of any revisions of these forward looking statements in light of new information or future events. In today's discussion, we'll present some important factors relating to our business that may affect our predictions.
You should review our most recent Form 10 ks and Form 10 Q for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. A PDF copy of the Vice Chairman's presentation and our related earnings press releases and financial tables, which include a GAAP to non GAAP reconciliation, can be viewed and downloaded on the Oracle Investor Relations website at www dot oracle.com/investor.
Okay. So I think I've got the controls. There we are. So we've read through those first two items. So just briefly, a few slides on Oracle.
We are been in business for a number of years and we've grown to be a very large company through organic growth and certainly acquisitions as well. So in fiscal 'seventeen, you've got some of our stats, dollars 37,000,000,000 of revenue, 100 of 1000 of customers and we're very broad based. We have been known in our industry for innovation around a lot of areas. We started in the database category, but we've innovated in lots of areas beyond our market share leader database business. So I won't try to read all those things, but we're we've made a lot of progress over the years.
We've gotten very broad. We're into a lot of different business with our customers. So these are some of the areas where we have a number one rating, both in technology and in applications. And then again, we're in many, many industries. So these are some particular industries where we have very strong presence.
I'll just let people maybe read that for a second, okay? And then the industry is going through an enormous change today around Cloud Computing. We started that investment over 10 years ago and we've spent 1,000,000,000 of dollars building Cloud applications, technology as well as 1,000,000,000 of dollars acquiring things. And the reason that the market is moving to Cloud is for a variety of reasons, lower costs, less complexity, more reliability, better security, rapid innovation and just overall simplicity. So we believe this trend will continue, and we think we're very well positioned to compete at every layer, whether it's applications, platform as a service, information infrastructure as a service, and even a newer business for us, Data as a Service.
So what because we're going through this transition, we have tried to create a lot of flexibility for our customers. So we certainly have public cloud availability around the world today, but we also have the ability to provide a so called private cloud. So we can provide databases as a service and other things within the data centers or the firewalls of our customers. So this is going to be a transition which will take a number of years for our larger customers. So we think we've put some very innovative ways to allow our customers to migrate either to private clouds initially and then and you can see that our newer business, our Cloud SaaS business, our Application Cloud business, our Platform as a Service revenue grew at very high rates of growth, and we continue that into our fiscal Q1 and expect to continue to enjoy a very high growth in our new Cloud businesses.
And ultimately, it will become the largest part of Oracle, we believe, okay? And then there's some of the other trends upon our more traditional business like hardware and so forth. When you take our cloud and put that with our off premise our traditional on premise business, the growth is fairly modest at only 3%. But basically what's happening is a huge changeover where our traditional on premise business has been slowing down for several years now, but it's being rapidly replaced or in many cases, we're creating new customers in the Cloud. So we think the current growth rate that we performed last year at 3% is not indicative of where we're going to be in a few years.
And it's really a very exciting change for us, I think, and certainly for our industry. We're very excited that ultimately, if we continue these high rates of growth in the Cloud, which we expect to, that will turn the total revenue growth up over the next few years. This is a geographic distribution. The company has always been a very global company. So 55% of our revenue is in the Americas, 29% in Europe, Middle East, Africa and 16% is in Asia Pacific.
This is a slice on our businesses, our software business, our hardware business and our services business, consulting, education, some other things. And so the slice of that software that is cloud is relatively small. But as I pointed out earlier, if that continues to grow at very high rates, it will become a significantly larger and larger portion of our total software business. And this chart kind of shows the growth rate for Software as a Service the last few years, and that trend line is continuing as we announced into our Q1. So we've seen we first have to sell these products and then we turn them on and they're recognized ratably.
So it takes some time for all the bookings that we've enjoyed to begin to show up in these revenue numbers. But the revenue numbers clearly are reflecting the success we're having in the marketplace. And then in the platform as a service area, which we started a little bit later than the SaaS services, we've seen very impressive growth and even a faster ramp up than we have in our SaaS business. So this is kind of a trend over the last several quarters showing the quarterly year over year trends as opposed to the annual trend for the last few years. And you can see it, I think, more dramatically how fast that business is growing quarter over quarter, and we've compared in this to a couple of our major competitors.
1 would be Salesforce in the CX space where we compete and one would be Workday in the HR Financials arena. So we believe that we're doing very well and growing fast and certainly everything you measure in life is relative to your competition. So we think we're gaining share and doing very well, and we expect that to continue. So this is a again, a longer term going back through a few years, taking a look at both the traditional software business on premise as well as the SaaS business. And what you see is that as you sell more and more SaaS, it is a recurring revenue.
So we have our traditional on premise support, which tends to be recurring, and now we're adding to that our SaaS business, which becomes a very stable, nice recurring business. So we've had, I would say, modest single digit growth over this period of time. But again, if we're successful as we hope to be and think we can be, this growth rate will actually start picking up as the SaaS become pass, become a much bigger part of the company. In terms of capital and how we've been spending, we generate a lot of cash flow. So the last several years on the right, we show the amount of our cash that we've used to either pay dividends or buy back shares and then we compared that to the previous 3 year period.
So you can see that the cash flow is increasing. We're making a lot of investments. We're building out data centers. We're buying companies. We're investing more than $5,000,000,000 a year in R and D.
But despite all that, because we have a high degree of profitability, we generate a lot of cash flow, which beyond the investments we make, we're buying back shares and paying growing amounts of dividends as the company's profits grow. So the last one is just kind of the balance sheet. We have a very strong return on equity and assets. We do have debt, but we also have a lot of cash. So the relative number really in terms of our balance sheet leverage is what we call net cash.
It's the amount of total cash we have offset by the debt that we have. And so we are in a healthy net cash position at this stage. So that's it. Let me just maybe go to the
can we turn off the last slide
or maybe there's a way to shut this thing down. So we now come to the part of the agenda providing for general questions and discussion. Anyone wishing to address the meeting should rise or raise your hand for recognition. Please state your name and indicate whether you are a stockholder or a proxy for a stockholder and proceed with your question. Please limit your questions or comments to 2 minutes.
We will answer as many questions as possible until we run out of time. I will now turn the mic over to our Chairman, Founder and Chief Technology Officer, Larry Ellison.
Thank you, Jeff. So we're here to answer your questions. So let's start.
Over here.
Per your slide, there were 2 figures stated. There's one that says free cash flow of $12,000,000,000 and this last slide says DKK14 1,000,000,000. What are you going to do with this free cash flow?
Okay. What we historically do, and we've actually already done some just last week, is we do some acquisitions, we pay dividends and we buy back stock. And that's pretty much what we've been doing for years. We just bought NetSuite last week. We closed about 10 days ago.
It was Monday. We spent $9,300,000,000 basically. And then as we generate cash, we're going to continue
to do that.
Yes. Anthony Fisher, stockholder. My question is this. Why should people stay with your cloud? And who are your main competitions that have other clouds in which people that have their own computers now maybe move to another cloud, okay?
So I just want that. And also if you could tell us a little bit about what type of growth do you see in the hardware end?
Okay. Why would someone choose the Oracle Cloud over competing clouds? So there are 2 radically different businesses and when people talk about cloud computing there is the application business called SaaS and there we compete with companies like salesforce .com and Workday and others, providing things like human resources applications, financial applications, manufacturing applications, sales force applications, service applications, marketing applications. So in SaaS we are the leader in ERP. We just have by far and away the best product in ERP.
We're much we're 10 times larger than our closest competitor which is Workday in the mid and high end of the ERP market. We were the first out there again in the mid market and the high end with a comprehensive solution and we have 10 times more customers again than our closest. Our closest competitor, we think customers recognize the fact that we were the innovator in this area. We were the 1st to market with a scalable system and they're rewarding us by picking us 10 to 1 over the competition. There are other areas like infrastructure as a service where our primary competitor is Amazon dotcom.
Here we were not first to market. Amazon was doing this for several years before we were. So why would anyone and Amazon is larger than we are in infrastructure as a service. So why would someone pick us? Well the Oracle database is the most popular data management piece of software in the world.
And if there are people, most of our customers are running that in data centers that they own. And if they want to move that workload to the cloud, they could move to Amazon. They have a choice. They could move to Amazon or they could move to Oracle. Oracle runs that workload much faster than Amazon.
In other words, we deliver comparable performance in our cloud to what you get on premise. Amazon can't do that. So we can have a larger Oracle databases than Amazon. We have a number of reliability features like rack that Amazon does not have. So and we're price competitive with Amazon.
Our infrastructure is about the same price as Amazon. So we deliver better performance, significant ease of use, better reliability, better scalability than Amazon. So if you have an existing Oracle database and virtually everyone in the enterprise market has these things, stores most of their data on Oracle, it is much easier to move that workload, those Oracle databases to the Oracle Cloud than the Amazon Cloud. And we think that we have a huge competitive advantage over Amazon in that specific area. And we think that's an enormous area.
The other question is,
what about how do you see the hardware growth? Oh, I'm sorry. Well,
hardware is interesting. It's a little bit like, say, how do you see software growth? If things are moving to the cloud, we used to sell software. I mean, the precise term is licensed software. So if you want to buy the Oracle database, you give us $1,000,000 and you run that database on your computers.
But you kind of own our software. When you move to the cloud, you don't buy the software, you rent it monthly. So we don't get this big check upfront, we just get a monthly rental. Difference between selling your house and renting your house. Big check upfront or getting it over a long period of time.
So in the software business, as more and more people are choosing to rent rather than buy, It overall after several years we actually get more money, But in the very beginning of the transition from selling to renting, it looks like our business is slowing down or getting smaller. It's not the case. It's just they're renting rather than buying. Same thing is true as the hardware business. So people used to buy hardware to put it in their data centers.
Now instead they're going to the cloud. In other words, they're renting not just our software in the cloud, they're renting our hardware in the cloud. So in the early days of this, it looks like our hardware business is slowing down. But in fact, it's really not. We're just going from selling hardware to renting hardware and getting the money ratably over a long period of time.
Again, over a long period of time, we get more money. But if you say, what about just your business of selling hardware? Well, that should get stay flattish or get smaller as people move to the Cloud. What about your business of selling software? Well that should stay flattish or get smaller as people are moving to the cloud.
But our overall business especially once we get through this transition, our overall business is going to grow very rapidly and we're going to be a much larger company growing at double digits and more profitable than we've ever been before.
Edward Wilson, stockholder since 1990 and Rupert Choe's resident. I just have a comment. I'd like to say thank you very much for building the school, the public school that you're going to have here. And if you want to make any comments on that, please do. Thank you.
Some of you probably don't know that this was Larry's idea. He asked me when I first came. He thought we should build a school on our campus. And at the time, we were just beginning our transformation of the whole company. And so we finally, after 17 years, have been able to do it.
It is entirely Larry's idea, and we have him to thank. Do you want to comment on?
I absolutely do. Ideas are a dime a dozen. Actually doing it is hard. So it's true. 17 years ago, I thought we should build a school on our campus.
I thought that would be great value to the community and to our own employees who live in the community to have a high quality school that we could support. That's easy to say, not so easy to do. So all the heavy lifting was done by others, by Safra led a team of people that actually took this 3 sentence idea and turned it into a building with teachers and children and got it through talked to the community and got support for it and now it's a reality. So I take full credit for those three sentences 17 years ago.
Thank
you. Okay. Well, I guess we're done. It's great with N. Thank you all very much.