Oracle Cloudware Sales Up, Licensing and Hardware Down

By Chris Preimesberger  |  Posted 2016-09-15 Print this article Print

Cloud software and platforms as services rose a robust 77 percent year over year, but hardware sales were down 19 percent and licensing was off 11 percent.

If one were to chart where Oracle's several businesses have been and are headed in the future, the chart would show one arrow headed decidedly up and to the right and two others slipping markedly down and to the right.

The Redwood City, Calif.-based database and data center middleware giant is selling cloud services faster than it ever has, but its hardware business continues to fade alarmingly, and its traditional on-premises license renewals—once the mainstay of the entire company—also are moving into what may become a free fall.

Putting this all together, the company on Sept. 15 reported lower-than-expected Q1 2017 revenue because growth in its cloud-based subscription services failed to make up enough revenue to cover for those weaknesses in hardware and traditional data center software.

Sales of Oracle's cloud software and platform as services rose a robust 77 percent year over year to $798 million, while sales of its new on-premises software licenses fell 11 percent to $1.03 billion.

Hardware sales—mainly consisting of high-performance database, server and storage machines—slipped 19 percent in the U.S. to $462 million and have dropped in double figures for several quarters in succession.

Oracle's net income rose to $1.83 billion, or 43 cents per share, in the first quarter ended Aug. 31 from $1.75 billion, or 40 cents per share, a year ago. Total revenue ticked up a modest 1.7 percent to $8.6 billion.

Analysts on average had expected quarterly revenue of $8.7 billion and a profit of 58 cents per share, according to Thomson Reuters.

Despite the reality of the report, Oracle executives—as most in their position typically do—chose to take an optimistic viewpoint.

"This year we are on track to sell more than $2 billion of SaaS [software as a service] and PaaS [platform as a service] annually recurring revenue," Oracle CEO Mark Hurd said. "We believe this will be the second year in a row that Oracle has sold more SaaS and PaaS than any cloud services provider.

"In the first quarter alone, we added more than 750 new SaaS customers including 344 new SaaS Fusion ERP customers—that's more ERP customers than Workday has sold in the history of their company."

Two months ago Oracle announced it is buying NetSuite for $9.3 billion to compete more completely with competitors such as Workday and that specialize in cloud-based services.

Oracle's shares fell 1 percent to $40.40 in extended trading Sept. 15.

Chris Preimesberger

Chris Preimesberger is Editor of Features and Analysis at eWEEK. Twitter: @editingwhiz


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