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Oracle Hardware Revenues Continue to Slip in 3Q16

By Sean Michael Kerner (Send Email)
Posted March 17, 2016

The cloud is having a very profound impact on Oracle's business, helping to grow one group of revenues while hurting another.

Oracle reported its third quarter fiscal 2016 financial results on March 15, reporting revenue of $9.0 billion, for a three-percent year-over-year decline.Oracle Hardware

Total cloud revenues, which includes Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) revenue as well as Infrastructure-as-a-service (IaaS) revenue, was $737 million, up by 43 percent from last year. Net income for the quarter was reported at $2.1 billion, which is a 14-percent year-over-year decline.

Oracle Hardware Revenues Still on Downward Trajectory

One of the hardest hit areas of Oracle's business is its hardware unit, which reported total revenue of $1.1 billion, for a 13-percent decline. Hardware product revenue was reported at  $604 million, and hardware support revenue came in at $531 million.

Oracle's hardware revenues have been on a downward trajectory for several years. Back in 2012, Oracle blamed the legacy Sun x86 hardware business for its revenue declines with CEO Larry Ellison emphasizing that his company's Exa-class systems would power revenue growth in future years.

The third quarter decline for Oracle's hardware business was actually a smaller loss than what it reported for the second quarter of fiscal 2016. During Oracle's second quarter fiscal 2016 earnings call the company reported that hardware product revenue was down by 20 percent and hardware support was down by 11 percent.

Oracle Cloud Business Continues to Rise

While the direction for Oracle's hardware business has only been going down, Oracle's cloud business is going in the exact opposite direction. Oracle's total Cloud Revenues were $735 million, up by 40 percent year-over year.

Oracle's cloud growth is not uniform, though, with different segments of Oracle's cloud business growing at different rates, if at all. The Infrastructure as a Service (IaaS) part of Oracle's business reported revenue of $152 million, for a two-percent decline. In contrast, Oracle's Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $583 million, up 57 percent year over year.

"Oracle is now selling more new SaaS and PaaS annually recurring cloud revenue than any other company in the world, including salesforce.com," Oracle CTO Larry Ellison said during his company's earnings call.

Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist.

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