Oracle buys integration challenge along with Sun
Through one important piece of corporate computing jargon--"integration"--Oracle has found a justification for its $7.4 billion acquisition of Sun Microsystems. Now it will have to convince historically skeptical customers, too, that the idea makes sense.
The all-cash acquisition agreement--announced Monday, costing Oracle $5.6 billion with Sun's cash factored in, and expected to close this summer--puts the innovative but financially bumbling Sun out of its misery after IBM's move to buy it fell apart earlier in April. The way to fit Sun's technology into Oracle's business model goes back to a project called Raw Iron that's more than a decade old.
Raw Iron ideas placed application software front and center while demoting the server hardware itself and the operating system to a subordinate role. The customer who needs some database software need hardly know what's going on under the covers.
What's smart about the approach is that it lets Oracle profit from Sun's diverse technology--which includes not just servers but also open-source software including Java and the MySQL database that Oracle already tried to buy years ago--without disrupting its own business too much.
Oracle signed a Raw Iron partnership with Dell and worked on it with Sun, IBM, and then-independent Compaq. With Sun's technology in house, one major challenge of those deals--who's in the driver's seat--evaporates with Sun a part of Oracle. There's no longer any question about which partner owns the customer relationship, which services the technical support contracts, and how the sales revenue is divvied up.
Will server appliances work this time?
Here's the rub, though. Raw Iron, along with the related concept of server appliances that arrived a few years later, was a marketplace dud.
Customers appreciate integrated technology to an extent, but Raw Iron and server appliances quietly submerged beneath the waves. Also worrisome for Oracle is the failure of one of its integration ideas, Unbreakable Linux. Customers by and large ignored this Oracle attempt to offer its own version of Linux, a clone of market-leading Red Hat's product.
Oracle Chief Executive Larry Ellison is a true believer, though, making the sales pitch in the company's official statement:
"Oracle will be the only company that can engineer an integrated system--applications to disk--where all the pieces fit and work together so customers do not have to do it themselves," Ellison said. "Our customers benefit as their systems integration costs go down while system performance, reliability, and security go up."
He does have a point. Sun has always focused centrally on the database market, and it has compelling technology assets for it that it hasn't been able to sell effectively: its current Niagara and the delayed higher-end Rock multicore processors, its Solaris operating system, and its Thumper storage servers with tremendous built-in data capacity.
And selling products at this high level of integration gives Oracle a way to ingest Sun's considerable open-source assets--among them Java, MySQL, Solaris, GlassFish, NetBeans--without too much indigestion. It might even give Oracle some incentive to be more active with the open-source community it's mostly kept at arms' length.
The once and future server market
Another issue, though, is that server appliances are to an extent an artifact from an earlier era, when companies bought and managed discrete systems. That remains a big business, but it's at odds with two important trends gaining steam in the industry.
First is virtualization, chiefly through EMC's VMware software. This lets a single server run multiple operating systems, with the software collection moving flexibly from one physical machine to another as work load demands shifted. By breaking the hard link between hardware and software, virtualization undermines the integration sales pitch and inserts a third party's technology between the server and its higher-level software.
Second is cloud computing, where applications run on central servers on the Internet rather than in a company's own confines. Cloud computing takes many forms, but from Oracle's perspective, an excellent example is Salesforce.com, whose sizable cloud-computing service competes directly with Oracle's Siebel business for customer relationship management chores such as tracking who bought what and when their warranty is up for renewal.
But having Sun's hardware assets in-house gives Oracle more flexibility to adapt to cloud computing on its own, in particular through Sun's recently relaunched Network.com cloud computing infrastructure.
Financial complications
Sun Chairman and co-founder Scott McNealy and even more so CEO Jonathan Schwartz likely are breathing a sigh of relief. Sun's stock plunged after IBM's attempted acquisition of Sun fell apart, but with an Oracle acquisition offer also on the table, it's now clear why Sun could play chicken with IBM then issue a statement about the board's faith in Schwartz after IBM walked. On Monday, Sun's stock surged 36 percent to $9.07 in mid-morning trading.
Oracle seemed eager to justify the price, arguing it will improve Oracle's earnings per share significantly and that it will help the company more than earlier massive acquisitions.
"We expect this acquisition to be accretive to Oracle's earnings by at least 15 cents on a non-GAAP basis in the first full year after closing," Oracle President Safra Catz said in a statement. "We estimate that the acquired business will contribute over $1.5 billion to Oracle's non-GAAP (generally accepted accounting principles) operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per-share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft, and Siebel combined."
It should be noted that although Oracle did surprisingly well integrating BEA Systems, PeopleSoft, and Siebel--despite having its own directly competing products in each case--but also that those were software companies. Sun is much more, and the future of its hardware business is cloudy.
Standalone server sales? At Oracle?
Oracle can sell software-hardware package deals and build a Sun-based cloud service, but how well will it serve customers who want to run their own machines with their own software? It's likely those companies will look elsewhere unless Oracle can show it truly wants to be a full-fledged hardware company.
It's not clear how much Oracle's financial projections rely on the strength of that standalone server business. Historically, selling software has much nicer profit margins. It's also not clear how much of a hit Oracle is expecting to its current software business after a Sun acquisition turns present allies into rivals.
Oracle also must deal with the fact that server makers Hewlett-Packard, Dell, and IBM could become less eager to promote Oracle's software. Because massive database servers are so complicated, Oracle has relied on tight sales, support, and marketing partnerships, and those companies could lose enthusiasm if their server sales force starts seeing Oracle's offering competitive bids.
At least Oracle's acquisition faces less of an antitrust hurdle than IBM's. Big Blue and Microsoft offer viable database competitors to Oracle's and Sun's, and Oracle buying Sun mean there would still be major server makers rather than the three left standing had an IBM acquisition gone ahead.
So Sun shareholders and government officials likely will be convinced of the merits of the deal. The ultimate success, however, will depend on how Sun and Oracle's customers see it.
Stephen Shankland writes about a wide range of technology and products, but has a particular focus on browsers and digital photography. He joined CNET News in 1998 and since then also has covered Google, Yahoo, servers, supercomputing, Linux and open-source software, and science. E-mail Stephen, or follow him on Twitter at http://www.twitter.com/stshank. 
PeopleSoft, BEA, Siebel, JDE, now add in Sun
I never remember IBM promoting Oracle software....
Oracle has an advantage here, Software sales drive the hardware sales and not the other way. Customers who run oracle apps will be able to get a nice bundle from Oracle and have only one vendor to deal with... So when they will need to chose the platform they want to run their database...
Oracle is now in the same league with IBM, however with superior products...
Only one box hardware supported, only one OS only one software vendor only one service provider.
But meabe they are right, as Sony does the same with Playstation ;).
Can work for small solutions.
http://askmonty.org/wiki/index.php/Main_Page
It's called MariaDB and it's already available. They're looking for more staff.
He does have a point.
How can you both totally ignore IBM? Put Sun and Oracle together and you still don't have anything near the scope, capacity, and revenue of IBM. This is ludicrous thinking.
Sparc > Power (Intel claimed that the Xeon 5500 was up to 1.71 times the performance of a year-old UltraSparc T5240 system, and 2.45 times the performance of a P570 POWER5 system, dating back to 2007, for less than half to less than a tenth of the system cost, respectively. "It's almost humorous," Gelsinger quipped. )
Sun x86 Servers/Blades > IBM X86 Servers/Blades
Solaris > AIX
Java + Jrockit > ?
Weblogic > Websphere
Oracle + Mysql > DB2 & Co
.........
http://www.lfbachrach.com/Larry%20Ellison%20for%20website.jpg
My guess is that Oracle kills the SPARC, which would be a shame, as it is a pretty good architecture. People like those in charge of Oracle view hardware as unnecessary, and I expect they will most likely focus on selling x86 systems, so they can save the cost of SPARC development.
They might also start to cripple MySQL, which would also be bad for the rest of the world, as every MySQL user is one more enterprise that isn't buying the much higher margin Oracle database sw.
So why does anybody besides Sun shareholders think this is good?
this is a total Hoax, that the real reason behind that take over was for Oracle then
to take over Sun which would then allow it to eliminate or greatly handicap MySQL
which it now has, that is it now Oracle has taken over Sun and the next step will be
to slowly Kill MySQL or render it ineffective. After all MySQL is the Key reason for
why Oracle cannot charge the ridiculous Multi Million Dollar per SQL installation
that it used to charge so regularly prior to MySQL taking off.
So for those who last year responded to my warning that Oracle will next take over Sun
and thus allow it to in time Kill MySQL, are you seeing the full picture now? Are you waking
up to the Hoax that it is being played by Silicon Valley again, are you waking up
to the fact that when wall street backed companies see their sales & profits in danger
they will resort to any rouge or any lies via their buddies in the Big Media to eliminate,
or so handicap that much lower cost competition, so as to effectively eliminate it.
http://www.enterprisedb.com
join the discussion here:
http://www.anoox.com/news/show_selected_article.php?article=33599
If we do realize that the true intention of Oracle is to KILL MySQL at great expense to the Internet community, we can STOP this, IF we do not come together and stop this then Oracle will get away
with killing MySQL to great determinant of the Internet community.
Oracel can't kill MySQL, nobody can, since MySQL is released under the GPL.
Case closed.
The InnoDB engine, the only real usable engine in MySQL, was written by the Finnish company InnoBase. That company was purchased by Oracle in 2005: http://www.oracle.com/innodb/index.html
Sun bought the MySQL company early last year. Now, Oracle buys Sun, supposedly for the hardware.
Oracle is in a position to wipe MySQL off the planet, if they want. I'm also quite worried about Java's future, though I doubt if Oracle going to do anything drastic to Java, since a lot of their Oracle code is written in Java. I just doubt that the community will have as much of a voice in it anymore. And Oracle's continued philosophy of proprietary over open-source will probably wind up killing all growth of Java as a software platform.
Put another way, there goes the neighborhood...
there is always this: http://www.postgresql.org/
Heard that it is more advanced and better than MySQL, but I have not tried it my self. Isn't MySQL OpenSource ? we can take it and make a new better version off of it and build something new, call it LinuxSQL or something.
The short version is that PostGreSQL focussed on features from the off while MySQL focussed on speed but they've been getting closer to each other in the last couple of years. Thats and PostGreSQL is BSD licensed.
But yes, I don't get this flapping about 'MySQL is dead!!!!1!11!'. Novell have already forked OpenOffice.org and if Oracle try to kill MySQL they'll just hand it to their competitors who'll cut into their profit margins anyway which is precisely why they wanted to acquire it in the first place. If anyone's going to be cutting into their OracleDB profits then they're going to want it to be them. They sure as hell can't stop MySQL so the best thing they can do is own it.
And "Sunacle" sounds too similar to cenacle or cynical.
"Sunora" it is.
- by pradeepbhanot April 20, 2009 11:59 PM PDT
- I remembering trying to offer Solaris x86 onto Sun's Intel competitors servers and them not not being too excited about the prospect.
- Like this Reply to this comment
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Showing 1 of 2 pages (40 Comments)Times have changed. Servers and OS brands mean much less when servers and storage is virtualized and redundant. A time when even Cisco can sell server blades.
Oracle is mixing a high margin software business with low margin hardware business. The net result should be lower margins. But, it is not uncommon for large IT sites to say they are and "Oracle" shop, where they used to say HP, Sun, Dell or IBM. Oracle has already abstracted a platform above the OS.
I expect this will help Larry with is end-goal of "owning" a larger proportion of the worlds data. It also helps Oracle lift one of the last obstacles to that goal, by building a data management engine like IBM has done with mainframe DB2 to enable rolling upgrades (uninterrupted version upgrades) that enable higher availability.