products revenues are primarily generated from the sales of our computer server and storage products. We market and sell our hardware systems products through our direct sales force and indirect channels such as independent distributors and value added resellers. Operating expenses associated with our hardware systems products include the cost of hardware systems products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third party manufacturers, warranty expenses and the impact of periodic changes in inventory valuation, including the impact of inventory determined to be excess and obsolete. Operating expenses associated with our hardware systems products also include sales and marketing expenses, which are largely personnel related and include variable compensation earned by our sales force for the sales of our hardware products, and amortization of intangible assets.

Fiscal 2012 Compared to Fiscal 2011:     Excluding the effects of currency rate fluctuations, hardware systems products revenues decreased in fiscal 2012 due to reductions in sales volumes of certain of our legacy product lines, including lower margin products, and due to the recent introduction of new SPARC processor-based servers that we believe slowed purchases of predecessor server products. These hardware revenue decreases were partially offset by increases in hardware revenues attributable to our Oracle Engineered Systems during fiscal 2012.

Excluding the effects of currency rate fluctuations, total hardware systems products operating expenses declined in fiscal 2012 primarily due to reductions in hardware systems products costs associated with lower revenues, lower intangible asset amortization, and decreases in bad debt expenses, which were partially offset by increased employee related expenses due to additional sales headcount.

Excluding the effect of currency rate fluctuations, total hardware systems products margin and total margin as a percentage of revenues decreased in fiscal 2012 primarily due to decreases in hardware systems products revenues and increases in hardware sales and marketing expenses.

Fiscal 2011 Compared to Fiscal 2010:     The increases in hardware systems products revenues, expenses and total margin for fiscal 2011 were primarily attributable to the impact of Sun’s contributions to our operating results for the full fiscal 2011 year as compared to fiscal 2010, which included Sun’s contribution to our operating results for only a portion of the fiscal year. In fiscal 2010, our hardware systems products expenses and total margin were unfavorably impacted by $29 million of fair value adjustments made pursuant to business combination accounting rules for inventories we assumed from Sun and sold to customers in the post-combination periods. Excluding the effect of currency rate fluctuations, total hardware systems products margin and margin as a percentage of total revenues increased as our total revenues increased at a faster rate than our total expenses.

Hardware Systems Support:     Our hardware systems support offerings provide customers with software updates