Oracle's cloud business skyrockets, but software sales dip
The success of Oracle’s cloud computing business this year allowed the company to post better than expected results during the fourth fiscal quarter.
The company’s cloud business is made up of two parts: software as a service and platform as a service. Oracle’s customers pay to access its applications online as well as to have access to tools that allow them to program and manage apps and analyze data. Its software as a service segment added 1,600 customers and its platform as a service segment added 2,000 customers during Q4.
These additional customers allowed Oracle to beat the previous growth rates it had announced to investors three months ago. Its cloud computing division saw $690 million in added revenue, proving the point that its late arrival to the cloud had indeed cost the company in the form of diminished revenue during the previous year.
As Oracle built up its cloud business, so did its rivals with Microsoft and Amazon fully embracing the cloud and moving a great deal of the computing operations of their customers to it. Saleforce.com and Workday Inc. are an additional two companies that Oracle needs to stay ahead of in order to continue to be successful.
During a conference call on Thursday, co-Chief Executive Safra Catz discussed his company’s recent success in the cloud, saying: "We dramatically overachieved in the cloud. For most companies, as their business grows, the growth rates go down. In our case, as the business grows, the growth rates are continuing to increase".
However, as Oracle has recently seen a great deal of success in its cloud computing business, its software business as seen a dip in sales. This is especially troubling due to the fact that the money it makes selling licenses to its software made up 72 per cent of the company’s revenue during the last quarter. In Q4 2016, software licenses earned Oracle $2.77 billion in sales but had still decreased 12 per cent from the previous year.
Oracle’s push into the cloud was certainly the right move for the company and at a time when software sales continue to decrease, the company needs to double down on its cloud computing efforts.
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