Cloud-happy Oracle dodges rumors it is axing its traditional hardware ... as sales of traditional hardware fall

Oracle is once more waving around its cloud revenue figures in response to another quarter of falling hardware sales.

This ongoing drop in traditional hardware revenue comes as Oracle tries to shake off rumors that it will be winding down its on-premises system divisions from January.

Speculation is rife on anonymous internet boards, and it's been suggested by some of our industry contacts, that Oracle may lay off as many as half of its 4,000 or so people working on server and networking hardware, that the Sparc division is not long for this world, and that Solaris 12 will be canceled and the operating system put into maintenance mode.

Oracle has said none of the rumors are true. The database giant announced its latest quarterly financial figures on Thursday, and made no mention of any major cuts. Somewhat cryptically, though, in a conference call with analysts shortly after, co-CEO Safra Catz said:

"We are proactively evaluating our expense infrastructure needed to support the on-premises hardware business in light of on-premises hardware revenue declines."

The traditional hardware wing soaks up hundreds of millions of dollars of R&D and yet continues to shrink, fueling gossip that Oracle is ready to pull the plug.

Meanwhile, Oracle is axing 71 employees at its site in Austin, Texas, who were working on Project RAPID. It is feared Oracle will continue this approach, laying off teams in dribs and drabs starting from next year, to keep the changes under the radar. Again, the California giant denies there will be a significant reduction in workforce.

Over to the quarterly numbers. For the fiscal 2017 second quarter [PDF] that ended November 30, the enterprise computing behemoth logged:

• Revenues of $9.03bn, virtually flat on last year's $8.99bn total.
• Net income of $2.03bn, down 8 per cent from last year. Operating income (before interest and taxes) was up 3 per cent.
• Earnings per share (non-GAAP) of $0.61 topped analyst estimates of $0.60.
• Cloud revenues of $1.1bn were up 61 per cent on the year-ago quarter.
• On-premises software revenues of $6.1bn were down 4 per cent
• Hardware revenues were $1.01bn, down 10 per cent, while hardware products revenue of $497m was down 13 per cent on the year ago quarter.

Not surprisingly, Oracle executives chose to focus on the soaring returns from the cloud business, rather than the dropping on-premise software and hardware businesses.

"For four consecutive quarters our Cloud SaaS & PaaS revenue growth rate has increased," said Catz, who earlier in the day was named as a member of president-elect Donald Trump's transition team of advisors (she will keep her job at Oracle for the time being).

"As we get bigger in the cloud, we grow faster in the cloud."

The growing cloud revenues will be needed to offset hardware revenues that continue to drop. Oracle executives blamed the 13 per cent drop in hardware revenues largely on the falling revenues in servers as well as costs related to its Micros Systems acquisition.

Meanwhile, in after-hours trading, Oracle stock was down 2.35 per cent, at $39.89 per share. ®

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