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December 18, 2012

Cloud boosts Oracle earnings but hardware continues to slide

Cloud acquisitions paying off for Ellison

By Steve Evans

Software and cloud revenue gave Oracle’s financial figures a boost, but hardware sales continued to decline.

For the second quarter of fiscal 2013 Oracle recorded revenue of $9.1bn, an increase of 3% compared to the same quarter a year ago. This beat analyst expectations, which stood at $9.01bn. Earnings per share also beat the Street’s estimates, coming in at 64 cents, ahead of the predicted 61 cents.

Net income jumped 18% to $2.58bn.

The improvement in revenue and profit was driven by a big jump in software revenue.

The company recorded a 17% rise in new software licences and cloud software subscriptions. Larry Ellison’s company has often been criticised for its slow approach to cloud computing, but these figures suggest it is beginning to make headway. That is to be expected given the investment made in cloud-based companies such as RightNow Technologies and Taleo.

Revenue for the software division as a whole, which includes licences and support, rose 10% to $6.5bn.

However hardware continues to be a struggle for Oracle following its acquisition of Sun Microsystems. Its products have been integrated with products such as Oracle’s Exadata and Exalogic range, which combine hardware and software, but it is not yet having an impact on Oracle’s financial figures. Revenue in the hardware division was $1.3bn, a 16% drop from the previous year.

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Speaking about the results Larry Ellison was bullish about the Sun acquisition. "Sun has already proven to be one of the most strategic and profitable acquisitions we have ever made," he said, according to the Financial Times. Ellison was referring to Java as well as the high-end Exadata system.

Ellison went on to say that the integrated Sun products had reduced focus on low-end hardware such as commodity servers. "We’re about to start growing our hardware business. In Q3, we will be turning the corner and in Q4, we expect top-line growth," Ellison said.

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