A quick take on Oracle and Sun
Earlier this year IBM (and reportedly) HP both took Sun Microsystems out for first dates but neither decided to take things any further (though IBM arguably got to second base). Now it seems
Oracle is prepared to go the whole way with the iconic dot.com technology brand. Are we looking at a beautiful wedding on the beach in Maui, or a drunken fumble in a dark alley followed by recriminations, tears and vengeful fathers?
It's telling that in this era of instant communication I feel under pressure to say something incisive and erudite, even though it's only a few hours since the acquisition was announced and hundreds of other commentators have heard the same conference calls and read the same press releases. So what is there to say beyond "blimey, I never saw that coming"? (Because it's true, I didn't – and I never would have put Oracle on the list if I'd been asked to draw one up). I'll take a deep breath.
I think the most telling take-away I got from all the materials available from the two parties today was the balance of information about earnings, assets and market shares vs. information about shared vision and customer value (there was a bit of the latter in evidence from Jonathan Schwartz and Chuck Philips, but it sounded distinctly lacking in energy). By contrast Oracle CFO Safra Catz was by far the most animated exec on the call, particularly as she explained how Sun would contribute more operating income in its first year as part of Oracle ($1.5bn) than BEA and PeopleSoft did combined (an interesting side note: Oracle paid more for BEA than it intends to for Sun, despite that tasty financial upside. Aren’t stock markets fantastic).
I wouldn't go as far as
Vinnie Mirchandani (executive summary: Oracle is just after making a quick buck and has a poor track record of sustaining innovation following its acquisitions), but I remain to be convinced as to whether this has any positive implications for customers of either Oracle or Sun. You could argue that with Oracle as banker, Sun customers can now have more confidence about the future of their technology choices: but squeezing out $1.5bn operating income out of a company that's only occasionally managed to turn any kind of a profit in the recent past is going to mean quite a lot of "shrinkage" – the kind of shrinkage that cuts much deeper than the back office. So a future rich in systems innovation is far from certain, at least in the short-to-medium term. And in the current environment, with data center economics shifting so fast, the short-to-medium term is likely more than enough time for Sun's customers' heads to be turned towards its competitors. This is a very fast-moving marketplace, and innovation has to be in evidence for any vendor wanting to avoid a slippery slope towards the Systems Supplier Graveyard.
Of course, Oracle's intention could be (as RedMonk's
Cote among others have noted) to strip out Sun's hardware and sell it off - instead focusing on the software assets (Java, primarily). In which case it will hardly care about what happens to Sun's systems customers.
It's important to be balanced though.
With my optimistic hat on, I can see that there are nice things that could come out of this. Sun could effectively tick a box that Oracle probably has on a strategy document somewhere called "Cloud Computing strategy";
despite Larry Ellison's public dismissal of the hype, we all know that makes sense for Oracle to continue to move forward from its current position on Cloud. Sun's virtualisation, datacenter-in-a-box and nascent Cloud platform offerings, combined with the "
integrated apps-to-disk" proposition Oracle and Sun talked briefly about today, could sow the seeds of a story that could bridge the interests of mainstream IT shops, leading-edge startups, ISVs and outsourcing providers.
At the moment, it's too early to tell – we'll have to wait until the summer, when the deal closes, to cast the runes again. Until then, let's get on with our lives. Now,
what's on YouTube today?
Labels: acquisition, cloud computing, industry, Oracle, Sun
