Three Months Ended

August 31,

(in millions)

2015

2014

Cloud software and on-premise software:

Revenues(1)

$

1,603

$

1,707

Cloud software as a service and platform as a service expenses

268

143

Sales and distribution expenses

1,286

1,279

Margin(2)

$

49

$

285

Cloud infrastructure as a service:

Revenues

$

160

$

138

Cloud infrastructure as a service expenses

85

76

Sales and distribution expenses

22

18

Margin(2)

$

53

$

44

Software license updates and product support:

Revenues(1)

$

4,697

$

4,731

Software license updates and product support expenses

271

257

Margin(2)

$

4,426

$

4,474

Total cloud and on-premise software business:

Revenues(1)

$

6,460

$

6,576

Expenses

1,932

1,773

Margin(2)

$

4,528

$

4,803

Hardware products:

Revenues

$

570

$

578

Hardware products expenses

301

297

Sales and distribution expenses

204

201

Margin(2)

$

65

$

80

Hardware support:

Revenues(1)

$

559

$

588

Hardware support expenses

172

184

Margin(2)

$

387

$

404

Total hardware business:

Revenues(1)

$

1,129

$

1,166

Expenses

677

682

Margin(2)

$

452

$

484

Total services business:

Revenues(1)

$

862

$

857

Services expenses

678

665

Margin(2)

$

184

$

192

Totals:

Revenues(1)

$

8,451

$

8,599

Expenses

3,287

3,120

Margin(2) 

$

5,164

$

5,479

(1)

Cloud software and on-premise software revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $1 million and $2 million for the three months ended August 31, 2015 and 2014, respectively. Software license updates and product support revenues for management reporting included revenues related to software support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August 31, 2015. In addition, we did not recognize hardware support revenues related to hardware support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amount of $1 million for each of the three months ended August 31, 2015 and 2014, respectively. See Note 7 for an explanation of these adjustments and the table below for a reconciliation of our total operating segment revenues to our total revenues. Our new software license and services revenues for management reporting also differ from amounts reported per our consolidated statements of operations for the periods presented due to certain insignificant reclassifications between these lines for management reporting purposes.

(2)

The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, marketing and partner programs, and corporate, general and administrative and information technology 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 income (expense), net.

Total margin for operating segments

$

5,164

$

                   5,479

Cloud software as a service and platform as a service revenues (1)

          (1)

          (2)

Software license updates and product support revenues(1)

          (1)

—

Hardware support revenues(1)

          (1)

(1)

Product development

          (1,188)

(1,174)

Marketing and partner program expenses

          (109)

(119)

Corporate, general and administrative and information technology expenses

          (394)

(367)

Amortization of intangible assets

          (452)

(547)

Acquisition related and other

          (31)

(25)

Restructuring

          (83)

(69)

Stock-based compensation

          (250)

(212)

Interest expense

          (374)

(261)

Non-operating income, net

30

                         16

Income before provision for income taxes

$

2,310

$

           2,718

(1)

Cloud software as a service and platform as a service 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 the accompanying condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to footnote one to our business and operating segments summary results table above in this Note 11 for additional information.