Proposed stock symbol: SORE
Customer line: “I’m a SORE customer…”
Rejected names: Sunacle? Too close to Unocal. Orasun? Sounds like a cloying dental product. Orsun? You could easily swap Ellison for Hearst in the remake of Citizen Kane…
Ok, so this isn’t a merger of equals. It is the end of Sun. Only Oracle survives. But this deal surprised me. I figured if Oracle wanted Sun, their well-oiled M&A machine would have swooped in a while ago rather than waiting for IBM to set things in motion, though there are rumors that Oracle made a joint bid with HP last year. They certainly could have gotten a better price. Did IBM get pulled in to play the second bidder? The extra dime Oracle is sharing is not exactly the sign of a bidding war.
Quick thoughts:
- MySQL – you’d never know Sun owned it from the Oracle press release. Interesting market definition problem for the antitrust authorities evaluating this transaction. With MySQL’s European heritage, maybe we’ll get some more novel legal theory from the EU.
- Solaris – Oracle has been treating it as a legacy platform in recent years and it is hard to see Oracle being any more successful with Solaris vis-a-vis Linux than Sun. After all, Oracle’s Linux relationship is unbreakable… But the acquisition means Solaris can reestablish itself as Oracle’s choice for high-end deployments. Not clear whether Solaris remains a go-to platform beyond the database.
- Sun’s Hardware Business – this definitely gets flipped to HP, Fujitsu, an Asian up-and-comer or someone else. Sun doesn’t have the share and Oracle has too much invested with partners to go to the vertically integrated model (not even IBM can sustain the vertically integrated model and they invented it). Oracle must already have a plan here (is there another shoe to drop with HP in the next few days?). The hard part is how to minimize the atrophy during the long road to closing the deal.
- SPARC – Oracle wants nothing to do with this. Maybe Fujitsu will take it.
- StorageTek – hope someone does the math on how much value got destroyed with this acquisition. Sun bought this company just as disk became cheaper than tape.
- OpenOffice – this deal could be a big boost for OpenOffice, as Oracle can’t resist an opportunity to tilt at Microsoft, especially with Microsoft driving more and more integration between the Office suite and the back-end applications that are Oracle’s bread and butter. Oracle can provide OpenOffice a value proposition beyond price.
- IBM – they got a good look at Sun, but in the end I suspect they’re going to regret not doing this deal. They regretted giving Microsoft control of the software crown jewels for the PC; they may face similar situation now on the server. Oracle can have a lot of fun making IBM choose between open systems sanctimony and controlling their own destiny. That of course assumes there is more relevant innovation to be had around Java. IBM should have figured out how to get through regulatory approvals or how to cut the company up into piece parts to get what they wanted.
- Integration Risk – this is a very different deal than the other big acquisitions Oracle has done. Sun customers are skittish as is and there is minimal maintenance gravy train here. Whereas Sun offered IBM access to a bunch of net-new customers, I suspect Oracle is already in all of Sun’s accounts. Serious layoffs ahead at Sun regardless of how it plays out for Oracle.
- Consumer/Embedded Java – not exactly high on Oracle’s priority list. Maybe it finally gets liberated in gesture of openness/misdirection by Oracle. Maybe they can sell it to Google. It fits nicely with the Android (lack of) business model.
- Open Source – will be interesting to see if any of the projects Sun open-sourced get fork and/or critical mass. Some argue Sun has already lost control of MySQL.
- Timing – I need to go back and look at the sequence, but Oracle has been pretty good since their acquisition parade began at timing deals in such a way that they help their year-on-year comparisons. Never forget Oracle is managed financially these days. This might explain why they didn’t pull the trigger on Sun earlier.
What did I miss?
10 responses
Nothing! Thanks, I needed that.
Where is Java in all of these?Threat to the .NET platform?
Java probably is worthy of its own bullet point ;-)Java, MySQL and maybe Solaris are why Oracle is doing the deal. Owning Java helps Oracle’s middleware and tools businesses and competes directly with .NET on the server in the enterprise. Java is less relevant when you get to the web.- Charles
I like the idea of Oracle giving client side Java to Google, but I doubt that would ever happen.They’ll probably keep it all, now they are the company who drives the Java platform so they’re not going to auction all the bits. I’m interested to see what they do with JDeveloper, keep it using Eclipse (IBM) platform or do they move Netbeans bits to it?Anyways, I’m glad it’s Oracle instead of IBM. I think it keeps the market more competitive this way.
Sun has been maintained by the government maintenance tail on all their products, some now 15-20 years old.Government has a tough time modernizing so they pay for maintenance of stuff you can’t find anymore in the private sector(outrageous amounts).Call it an HP buying EDS play more than technology.And since ORCL is less about technology than services (esp. in the government space), this all fits.Granted, Sun disappears.
You could elaborate in the impact in the enterprise applications space. SAP is the market leader there. And there is no love lost between the two companies. SAP has invested heavily into it’s Java based products but has seen hardly much by way of revenue from those products. I see SAP moving further away from java and more to the MS side. Is there a MS- SAP merger on cards?
SAP has to be feeling the heat. Oracle’s strategy of the last couple years has really worked and SAP has fallen off the curve. The Oracle strategy of declaring yourself number two and drawing a bead on number one can be very effective. I’d be really, really surprised to see a MSFT-SAP merger, but never say never. SAP’s valuation is down and the Sun acquisition could spook them. My advice to both SAP and MSFT would be to keep cool and not do anything rash. The Soracle deal could very well end up net positive for both of them. IBM-SAP seems like a better prospect to speculate about. As I have written before, IBM’s applications strategy is a failure.
Yes, you forgot just a few things, but I can’t blame you, ’cause Sun’s management is also forgetting to mention that: Middleware Software. I just saw one Sun official saying what a wonderful merger it was as there were "no overlaps" in both portfolios…Well, those are the overlaps:-Glashfish, OpenESB, Web Server, Portal and similar stuff: Dead. Oracle just bought BEA for this…-Identity Management: Great mistery, as Sun’s products are in general way better (IdM, Role Manager, Directory Server, OpenSSO), but who knows what will do, and so far the competition in this area has been fierce (and Sun used to win when technical reasons were used)-MySQL: Well, this is not really an overlap (and you already mentioned it). I guess they just want to control it, as Sun should have done with Linux in the early days to avoid this mess.
Thanks for article. Wondering why cloud aspect was omitted.How does Sun’s cloud technology (via Innotec & Q-layer acquisitions) affect Oracle?
Re: Cloud, I’ve heard a lot of words from Sun about cloud but never seen them in the real world so don’t have any perspective. Larry is on the record about not believing in cloud, but I am sure he’ll get over that.– Charles