How Sun Could Fit With Oracle's Strategy

Acquisition would allow Oracle to integrate an application, operating system, middleware, and database on top of its own hardware.

Charles Babcock, Editor at Large, Cloud

April 23, 2009

4 Min Read

Ellison's plan: Sell ever more to the business customers it already has. Photo by Pladys/Flickr

If it closes its acquisition of Sun Microsystems, Oracle will become an operating system and hardware vendor, two things it has expressed little interest in doing in the past.

Doing so has its appeal, however, since Oracle could integrate an application, operating system, middleware, and database on top of its own hardware. That fits with CEO Larry Ellison's basic growth strategy: sell ever more to the 300,000 business customers he already claims.

"Completely integrated systems should be even more popular and extremely profitable," Ellison said on a conference call. Sun's Solaris OS already is closely tied to Oracle, running more Oracle databases than any other OS, ahead of No. 2 Linux.

Oracle has offered $7.4 billion for Sun, around what IBM reportedly was offering before those talks broke down. Sun's board approved the deal, and this pairing is unlikely to face the antitrust scrutiny IBM would've faced as a server rival.

The deal would transform Oracle from a software company to a company that packages systems "from database to disk," Ellison said, a reminder that Sun acquired Storage Technology in 2003 for $4.1 billion.

Expect Major Cuts
Look for Oracle to trim Sun's server line some but stay a significant hardware maker. Oracle is built to sell large systems to corporations, notes Gartner's Kenneth Chin, and that means retaining the high-performance end of the UltraSparc server line. Also, Oracle's data warehouse machine engineered with Hewlett-Packard on x86 hardware has been well received, so it's likely to explore growth avenues in x86 servers, Chin says.

Regardless of the product shakeout, Oracle's sure to bring swift layoffs and R&D cuts with a ruthlessness that Sun couldn't muster. Technology Business Research analyst Stuart Williams predicted 10,000 to 15,000 layoffs, and annual savings of $1.5 billion in operating expenses in year one.

Many an open source advocate dreads Ellison taking over MySQL, but the open source database's fate was by no means certain under Sun. Sun paid $1 billion for MySQL AB in early 2008, then watched founders David Axmark and Michael Widenius, and CEO Marten Mickos, leave. Oracle may keep hosting MySQL development as way to increase the number of relational database users and build an Oracle software stack that includes MySQL with some of its Java middleware.

6 Things To Look For

Hardware, Solaris
Oracle could integrate systems from OS and server to database and storage. MySQL
Sun's open source assets are a wild card. One path: Oracle uses them to lure new middleware customers. Java
Sun owns and licenses it, Oracle's apps are built on it.

MySQL isn't on par with Oracle's database, but its development plan was aimed in part at making it a more capable competitor. Oracle can't kill MySQL off, since the large community of developers and users could just take the open source code and start a new project. So don't expect any sudden moves by Oracle.

Oracle might just focus on getting more MySQL customers using Oracle's Fusion middleware, which Ellison calls the company's "fastest-growing business," destined to be as big a revenue generator as Oracle's database business. Sun's Java middleware isn't a major asset for Oracle, adding new products in a few instances but bringing many duplicates that Oracle is likely to weed out.

After hardware and infrastructure software, the third leg to this deal is Java. The thought of IBM owning Sun couldn't have sat well with Oracle, given how much of its future is focused on Java. Oracle's converting Siebel, PeopleSoft, and JD Edwards apps into a new Java application suite with which it will take on rival SAP in the business applications market. If IBM owned Java, Oracle would have needed to buy a Java license from a powerful competitor. Buying Sun, even with its huge product lines, might have looked like the better alternative.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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