Today Larry Ellison and Oracle will reveal in great detail their plans for the combined Oracle/Sun entity, a deal that Ellison first proposed nine months ago. In that context, it's illuminating to analyze Oracle's transformative intentions for wanting to acquire Sun.
So why indeed did Larry Ellison want Sun so badly? Why was he willing to pay $7.4 billion and put up with the excruciating and endless (if I may mix my continental metaphors) Grand Kabuki theater of the absurd staged by the European Union's anti-capitalism commission? Well I have my theories—10 of them, in fact—and I'd like to share them with you in reverse order, starting with #10 and moving through to my #1 reason. Let me know what you think:
10) Lots of customers seem very excited and optimistic about the deal's potential. In slotting this customer-outlook angle at #10, I am certainly not downplaying it or implying that Ellison is unconcerned with what customers think; quite the contrary. But first and foremost, the deal had to make sense for Ellison and Oracle—and then, if they were to find that Sun customers were also pumped up, then the deal was a lock. Here's what a few customers had to say:
--"I see this as a natural evolution of the long-term relationship between Oracle and Sun," said Marriott International CIO and EVP Carl Wilson in a batch of customer comments on Oracle.com. "This acquisition helps round out Oracle's suite of products and services providing essential solutions and powerful packaging that only a leading world-class software company could provide."
--"Oracle's acquisition of Sun provides Oracle with more best-in-class technologies to add to their portfolio," said Hologic Inc. SVP of Information Services and CIO Dave Rudzinsky. "The combined companies will be able to deliver a comprehensive enterprise application platform and solution from end-to-end. I feel Oracle is becoming more of a total solutions provider not just another software or technology vendor."
--"The combination of Sun and Oracle shows Oracle's commitment to go vertical amidst the trend of Cloud Datacenter consolidation to heighten their IT infrastructural presence," said Prof. Satoshi Matsuoka, head of research infrastructure at the Tokyo Institute of Technology. "In fact, we are optimistic that the combination will continue its trend to provide us HPC products with technological advantages necessary to be classified as one of the top-ranked supercomputers in the world, possibly for our next-gen TSUBAME 2.0."
9) Sun will have contributed an additional $1.5 billion in non-GAAP operating income. Oracle co-president Safra Catz said just that during last month's earnings call with analysts, saying the timeframe would be 12 months after the close of the deal. As with #10 above, I'm not saying the $1.5 billion is unimportant to Ellison—and again, remember, this is a list of what I think Larry Ellison's Top 10 reasons would be. Yes, he's always delivered for Oracle shareholders, and with an incremental target like that, he'll certainly continue to do so. But I still would argue that Ellison wanted this deal more for the people and technology assets that will generate that huge profit boost, rather than for the $1.5 billion itself.
8) To rattle the tech industry and force a series of changes based on Ellison's own terms. In public comments, Ellison castigated the IT industry for dumping assembly and integration work on customers who have no desire to be assemblers and integrators, and intimated that his newly constituted company would force a major change in that model: "We've treated customers like computer hobbyists—go buy an operating system, go buy some network software and routers and a database and some applications and hire a lot of programmers and—we've been selling components. It's what Andy Grove referred to as 'the horizontal computer system'—by the way, I think Andy Grove is a brilliant guy—I just think he's fundamentally wrong. He believed the right model is everyone is specialized in one area—you make memory chips or you make microprocessors—but at some point somebody's got to be the integrator, and the question is, is the integrator IBM Global Services, or is the integrator a systems company like Oracle/Sun, where the database and the hardware and the networking and the middleware and the applications all work together, and we believe that the right place to integrate is at the engineering level, not what IBM Global Services is trying to do, which is to integrate at the consulting-service level." Any CIOs out there want to push on Ellison to let you keep all that cool assembly and integration work??
7) Ellison wants to save or revive or restore Sun's reputation and capabilities. For all of his phenomenal successes in entrepreneurship, finance, acquisitions, personal wealth, sailboat-racing, and high-end competitive strategy, Larry Ellison has always had and will always have a deep and abiding love of technology: he cut his teeth on programming, code, and innovative databases. And shortly after he announced his bid to buy Sun, he came out with a 5-part pledge to Sun customers that was all about commitment, investment, and the extension/resurgence of a glorious brand:
Ellison vowed to Sun customers that he would spend more money developing Sparc than Sun does now; spend more money developing Solaris than Sun does now; spend more money developing MySQL than Sun does now; "dramatically improve Sun's systems performance by tightly integrating Oracle software with Sun hardware; and "have more than twice as many hardware specialists selling and servicing Sparc/Solaris systems than Sun does now."
At the bottom of his pledge, lest anyone wonder what his real goal was, Ellison said in bold letters, "We're in it to win. IBM, we're looking forward to competing with you in the hardware business."
6) Ellison loves Sun's technology—ALL of it. When Ellison said that Oracle/Sun could deliver everything a CIO needs from data center to disk, he wasn't kidding—and he has publicly expressed an intense desire to keep all of Sun's technologies. Look at his passion ("Sun has been a national treasure") as he speaks about its technology in our Sept. 28 column called Global CIO: Why Oracle's Larry Ellison Will Tell The EU To Pound Sand (and be sure not to miss the closing line in this excerpt):
"We're keeping everything: we're keeping tape, we're keeping storage, we're keeping x86 technology and Sparc technology and we're gonna increase the investment in it. Sun—if you look around at technology companies, and if for $1 we could buy IBM, HP, Sun, or any of these companies—I'm not sure we wouldn't pick Sun, if they were all the same price—and Sun was selling at a helluva discount. So Sun has fantastic technology—we think it's got great microprocessor technology—it needs a little more investment but we think Sparc can be extremely competitive; [Sun's] got the leading tape archival storage systems—we think Open Storage, their new system, is absolutely fantastic; Java speaks for itself; [and] Solaris is overwhelmingly the best open-systems operating system on the planet. Sun has been a national treasure for the last couple of decades and we think with that combination of Sun technology and Oracle technology, we think we can succeed and compete and beat IBM. And that's our goal."
5) Ellison wants to push Oracle/Sun into growth markets and recast its entire image. In this excerpt from my transcript of a rare public talk/interview Ellison gave in September at the Churchill Club in the Bay Area, he offers a clear vision of what he wants the new company to be and why he's so excited about its prospects: