Oracle's new software licence sales tank - and cloud isn't growing fast enough to plug the gap

Customers just not buying Oracle software licences in the way that they used to

New licence sales fell by almost one-fifth at software giant Oracle, according to its latest financial results, and sales of cloud service subscriptions aren't increasing fast enough to plug the gap.

New software licence sales fell by 18 per cent in the three months to the end of November, Oracle's fiscal 2016 second quarter, down from just over $2bn to $1.68bn compared with the same period last year. Oracle claimed that increases in the value of the dollar accounted for some of that, although they would still have registered a fall of 12 per cent in constant currency, according to the firm's figures.

A 26 per cent increase in total cloud revenues was insufficient to make up for the accelerating fall in new software licence sales. Oracle's latest results indicate the company generating a total of $649m from sales of cloud computing services compared to $516m in the same period last year.

According to Oracle, sales of "cloud software as a service and platform as a service" subscriptions increased by 34 per cent to $484m, while sales of cloud infrastructure-as-a-service subscriptions increased to $165m in the second quarter.

However, when compared to the fiscal 2016 first quarter figures, it appears that even new cloud service subscription sales may be levelling off. In the first quarter, Oracle posted cloud revenues of $451m and cloud infrastructure-as-a-service revenues of $160m to make a total of $611m - up sequentially by a much less dramatic 6.2 per cent.

Naturally, Oracle's leadership was keen to stress the rate of growth in cloud revenues compared to the same period last year. "We are still on-target to sell and book more than $1.5bn of new SaaS [software-as-a-service] and PaaS [platform-as-a-service] business this fiscal year," said Oracle founder, executive chairman and chief technology officer Larry Ellison. "That is considerably more SaaS and PaaS new business than any other cloud services provider including Salesforce.com."

CEO Mark Hurd added: "We did 100 Fusion HCM [human capital management. ie: HR] deals and over 300 Fusion ERP [enterprise resource planning] deals in the quarter. We now have more than 1,500 ERP customers in the cloud - that's at least ten times more ERP customers than Workday."

Hurd's co-CEO, Safra Catz, parroted a similar line: "We grew our SaaS and PaaS revenue 38 per cent in constant dollars this past quarter, and we expect that revenue growth rate to accelerate to nearly 50 per cent in the third quarter and close to 60 per cent in the fourth quarter."

Total revenues at Oracle fell by six per cent to $8.99bn from $9.6bn in the same period last year, while net income also declined by 12 per cent to $2.2bn.