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How Did Oracle’s Hardware Segment Perform in Fiscal 2Q18?

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Hardware segment revenues fell again

Earlier in this series, we discussed the growth in the server market’s revenues and shipments. We also discussed the factors that revived growth in this space. Let’s see if Oracle’s (ORCL) Hardware segment benefitted from growth in the server space in fiscal 2Q18.

In fiscal 2Q18, Oracle’s Hardware segment fell ~7.3% to $940 million. The below presentation shows that Oracle’s Hardware segment revenues as well as its contribution towards overall revenues have been falling for the past couple of quarters. Oracle’s Hardware segment contribution has fallen from 17% in 2012 to 11% in 2017. It was 10% in the last two quarters including fiscal 2Q18.

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Oracle’s strategy to pursue the cloud space is likely hampering its Hardware segment

Oracle’s Hardware segment encompasses servers, storage, and high-performance databases. Revived growth in the server market should have helped Oracle’s Hardware segment. However, fiscal 2Q18 results indicated this was not the case.

As cloud computing technology is gaining momentum, computing, network, and storage facilities are increasingly being used to virtualize data centers. These factors have driven the growth in the hardware market. An increased preference towards IoT (Internet of Things) technologies and electronic devices could further propel growth in this space.

A likely reason that Oracle’s hardware segment hasn’t been able to benefit from this trend is the company’s current focus on shifting from being a hardware company to being a cloud company.

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