A letter to the Employment Development Department indicates that Oracle Corporation (NYSE:ORCL) has laid off approximately 450 members of its workforce. This follows a shift in strategy as the enterprise software company moves to a cloud-based model. The company has however refuted claims that the Santa Clara facility was being closed in view of the layoffs.
“Oracle is refocusing its Hardware Systems business, and for that reason, has decided to lay off certain of its employees in the Hardware Systems Division,” a company blog post read.
SPARC department on the losing end
Those expected to be laid off include administrative assistants, technicians, software and hardware developers and some executives. These employees were mostly from the SPARC hardware department. Affected employees will get two months’ worth of full pay and benefits as per the letter to the Employment Development Department.
Speculation on layoffs at Oracle had been rife for weeks. This is because of the disruption that has been occasioned by its clients abandoning their own data centers and turning to outsourced ones. For years a significant portion of Oracle’s revenues emanated from sales of software and hardware to organizations that needed these products for their privately run data centers but this has suffered from the disruption.
In the fourth quarter of 2016, for instance, revenues from sales of hardware products declined by 13% year-on-year. Software sales, on the other hand, fell by 20%. Besides the employee layoffs, Oracle will also not be releasing an upgrade of the Unix-based Solaris operating system. Speculation has also been rife that this operating system which Oracle obtained by acquiring Sun Microsystems in 2009 is on the chopping block.
Hope in the cloud
The shift in Oracle’s strategy has seen the company build data centers to provide cloud services to organizations as well as to offer software as a service. Sales from software as a service segment increased by 81% in the company’s latest financial report. According to Oracle’s co-chief executive officer, Mark Hurd, the company expects to bring in revenues of more than $2 billion in 2017.
In Friday’s trading, Oracle Corporation rose by 1.68% to close the day at $39.87 a share.
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