This morning, we found out that the Sun might rise again. Oracle has decided to spend approximately $7.4B to buy its long time neighbor down the highway. This combination of two stalwarts instrumental in the rise of the
From Oracle’s perspective, through acquisition of Sun it gets to control Java and the ability to kill off an imminent threat to its database hegemony in the MySQL open source database. Control of Java, at the core of Oracle’s enterprise software products and similarly for many of its competitors, is a real coup for Oracle and Larry Ellison. This can’t make IBM (or SAP) very happy as it has also built its key business SW offerings around Java. It also puts Oracle in even more direct conflict with Microsoft beyond the database and into its middleware efforts with .NET framework.
Obviously, Oracle is buying a large HW business. Oracle does gets the opportunity to up-sell the vast array of Sun shops in which it may not currently have installed its back office suites. However, Oracle has attempted to get into the HW business more than once in the past and was never very good at it- always allowing its products to die a slow, silent death. We believe that Oracle will not stay in the HW business very long. Indeed, we would expect Oracle to take the SW assets (primarily Java and Solaris), perhaps keep some key HW subsystems (networked storage – an increasingly important market for Oracle’s analytics, BI and databases) and phase out or sell off the commodity HW business (perhaps to IBM or HP). There is no advantage in Oracle owning a HW business. If anything, it is a disadvantage, both in terms of alienating partners (e.g., HP, Dell, etc.) and in the challenge of making a profit on HW. If Oracle’s true intent in this acquisition is to stay in the HW business, then the board needs to do some serious soul searching.
What about Sun? It gets to stave off its forthcoming collapse. This deal is really a life line to Sun, which it surely needs. Sun had not kept up with the challenges of the new, commodity and Open Source based needs of its customers. It is top heavy and can’t compete with leaner suppliers like Dell, HP and even IBM. IBM’s offer to buy Sun fell apart on a number of points. But the
This may be a good deal for Oracle and Sun, but is it good for the marketplace? Not really. End users get a more controlling influence in Oracle that could ultimately mean fewer choices and increased prices. Oracle has a history of being “pricey” and this probably won’t change. How will Java licensing change? Will there be Oracle proprietary extensions (like in SQL)? What will happen to Solaris and Open Solaris? Oracle would be smart to spin out the HW business as soon as possible. This may actually benefit IBM, HP and other Unix server suppliers, and may also signal the death knell for the Sparc processor (to the benefit of Intel and AMD).
So the winner in this event is clearly Oracle, but Sun wins as well since it would have floundered without a rescue. The losers are the end user organizations who can now expect higher prices for SW and fewer choices. Open Source is an ugly word at Oracle. Of course, IBM and HP are short term losers but may ultimately gain if the Sun HW business suffers or is sold off, which is highly likely (and both IBM and HP could ultimately bid for the business). And Microsoft and/or Sybase may gain share at the edges if Oracle loses customers due to heavy handed terms and pricing, or may gain some MySQL accounts.
Clearly, this acquisition by Oracle of Sun is a glass half full for business users
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Jack Gold is the founder and principal analyst at J.Gold Associates, an information technology analyst firm based in Northborough, Mass., covering the many aspects of business and consumer computing and emerging technologies.
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