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September 17, 2015

Oracle software sales decline as cloud shift causes Q1 pain

Company is expecting rapid growth in its cloud business.

By James Nunns

Oracle hit a sour note with its first quarter financial results with net income falling 20% for the period ending 31st August.

Net income declined to $1.75 billion from $2.18 billion in Q1 the previous year. The software maker issued total revenue up 7% on a constant-currency basis, while licenses declined 16% in dollars, or 9% in constant currency.

Big Red reported $1.15 billion in new software licenses.

Despite the decline in software licenses, Oracle posted strong gains in its cloud business in Q1 with revenues rising 34% in constant currency. Despite the growth of its cloud business, it is a much smaller part of the business and its declining software sales will be a concern.

Despite these concerns, Larry Ellison, CTO and former CEO, Oracle, said: "Over the last three years, we’ve been in the start up phase of our cloud business. We’ve developed services at all four layers of the cloud.

"We have deployed cloud services in 19 data centers and 14 countries around the world. We now have in place the physical infrastructure to dramatically expand our cloud customer base. We are entering the rapid growth scale out phase of our cloud business."

Combined, software and cloud revenue totalled $6.5 billion, a 2% drop year-over-year. Cloud makes up $611 million of this. Ellison predicts that operating profit margins from the cloud would jump from around 40% to 80% in the next two years.

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Software and Cloud revenues for the quarter totaled $6.5 billion, a drop of 2 percent year-over-year. Cloud revenues alone were $611 million, whereas analysts were looking for an average of $630 million.

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