- Oracle plans layoffs of 20,000 to 30,000 employees amid financial challenges
- The company may sell Cerner, its healthcare software unit acquired in 2022
- US banks have pulled back from financing Oracle’s AI data-centre expansion
Oracle is considering laying off about 20,000 to 30,000 employees. The multinational company is even mulling to sell off some of its activities, since banks in the US have pulled back from financing its AI data-centre expansion, the CIO reported, citing investment bank TD Cowen.
The purported move is aimed at freeing up $8 billion to $10 billion in cash flow. Further, it is weighing a sale of Cerner, Oracle's health-care software unit that it acquired for $28.3 billion in 2022. This comes at a time when multiple banks in the country have pulled back from Oracle-linked data-centre project lending.
“Both equity and debt investors have raised questions regarding Oracle's ability to finance this buildout,” read the research report by TD Cowen.
It is being said that the financial challenges have cropped up from the scale of the company's infrastructure commitments that amount to $156 billion in required capital expenditure.
The layoffs could be part of its broader strategy to reduce costs and secure more funds for the AI projects. As of now, the measures have not been officially announced by the company.
The word 'Oracle' remained an active trend on Google Trends on Monday. If the layoffs take place, these could have a significant impact on the tech sector. Oracle's borrowing costs have risen sharply after banks pulled back from providing financing.
TD Cowen claims that the lenders have nearly doubled the interest rate premiums that they are charging the company for data-centre project financing since September last year. This further pushes the borrowing costs to levels that are typically reserved for non-investment-grade companies.
On the other hand, the higher costs have now stalled deals. “Multiple Oracle data-centre leases that were under negotiation with private operators struggled to secure financing, in turn preventing Oracle from securing the data-centre capacity via a lease,” the CIO cited the report.
Without financial support, private data-centre operators will be unable to build facilities that Oracle needs. This will create a bottleneck in the company's infrastructure rollout, the report adds.
Recently, it came out that Oracle is expecting to raise $45-50 billion this year to build additional capacity for its cloud infrastructure.
Larry Ellison, who co-founded Oracle Corporation, said the company is aiming to achieve its funding objectives using a combination of both debt and equity financing.
In an official statement, the company said, "Oracle is raising money in order to build additional capacity to meet the contracted demand from our largest Oracle Cloud Infrastructure customers, including AMD, Meta, NVIDIA, OpenAI, TikTok, xAI and others".
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