So Oracle ends up owning Sun Microsystems. I couldn’t believe it at first, thinking somehow that it was all just a ploy to get IBM to pull out the Big Checkbook. And while the deal may have begun with that thought glowing in the mind of Jonathan Schwartz, it ends with the heart of Sun moving a few miles up 101 to where it will certainly die.
IBM doesn’t want Sun and is gleeful with the idea of Oracle taking over, as you’ll learn if you read the internal IBM memo copied below. Big Blue does a very good job here of explaining its thinking and most of it makes sense. No white knight.
But what will Oracle DO with Sun? Make a lot of trouble for IBM, or try to, I think, but even doing that will be a challenge. Java is deliberately unprotected by patents and subject to enough industry oversight that Larry Ellison can’t just kill it or somehow make it proprietary overnight. MySQL could be killed, but for Open Source that just means it would branch and be reborn a day or a week later mostly intact and protected by nerds who would by then be very, very angry. On a positive side Oracle will undoubtedly make some very useful database appliances and may well come to dominate that as yet non-existent product space.
But for the most part what Oracle will do with Sun is show a quick and dirty profit by slashing and burning at a produgious rate, cutting the plenty of fat (and a fair amount of muscle) still at Sun. If you read the Oracle press release, the company is quite confident it is going to make a lot of money on this deal starting right away. How can they be so sure?
It’s easy. First drop all the bits of Sun that don’t make money. Then drop all the bits that don’t fit in Oracle’s strategic vision. Bring the back office entirely into Redwood Shores. The cut what overhead is left to match the restructured business. Sell SPARQ to some Asian OEM. Cut R&D by 80 percent, saving $2.4 billion per year. I’m guessing sell StorageTek, maybe even to IBM. And on and on. Gut Sun and milk what remains.
The plan has to have been on the table since last Fall when Andy Bechtolsheim, the mine canary of Sun’s executive suite, left the company for the second time. Even then it was clear that the options were a good sale or murder-suicide.
I blame Schwartz, of course, but I don’t blame him, too, because I think he had little choice. He just wasn’t a lucky guy, it turned out.
So what’s next for Sun? Nothing, I think.
Here’s the internal IBM memo on the deal:
PPublished on 21 April 2009
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Oracle enters a twilight zone
The acquistion of Sun creates opportunities for IBM.
The surprise announcement of the Oracle deal to buy Sun Microsystems creates
some new opportunities for IBM. Since its days as a bright star in the dot-com
era, Sun gradually lost its place in the UNIX server market it once dominated.
How does IBM stand to gain, if and when this transaction closes?
First, momentum. According to IDC’s latest report, IBM’s share of the $17 billion
UNIX server market grew to more than 37% in 2008 while Sun’s share fell to 28
percent; since 2000 IBM has gained 19 points of share, while Sun has lost 7
Since 2006, the number of clients that have migrated from Sun to IBM Power
Systems has grown 10% annually to more than 750 clients as of 1Q 2009. IBM’s
Migration Factory has eased the transition for these Sun clients to the Power
platform with its leadership performance and virtualization technologies. In
addition, IBM technologies such as its Infosphere Information Server have enabled
a steady stream of Oracle clients to migrate from Oracle’s high-maintenenace-fee
database to IBM DB2 and Informix data servers. The fact that Oracle and Sun will
share the same address does nothing to change these trends.
Second, openness. IBM offers every client the greatest choice and best value in
both hardware and software to meet their business needs. IBM will continue to
support Power Systems clients that have chosen Oracle’s middleware or database,
just as we will continue to support the IBM middleware and data server needs of
Sun server clients.
Oracle, after acquiring many software vendors partial to IBM server platforms, has
long promised to protect the compatibility of IBM servers, notably Power; Oracle
clients will continue to demand this compatibility moving forward.
Oracle’s self-serving interpretation of “open” sharply contrasts with IBM’s
championing of Linux and the broad open source community. Despite this, clients
committed to IBM middleware have forced Oracle to maintain long-term
compatibility with IBM software through previous Oracle acquisitions of IBM
Business Partners such as PeopleSoft and Siebel, and this bodes well for Java
technology. Oracle is unlikely to make sweeping changes – it’s the subtle changes
we’ll watch for. MySQL, an open-source competitor to Oracle’s database that was
acquired by Sun last year, should pose an interesting test of Oracle’s openness.
Sun’s billion-dollar acquisition was hurting Oracle. If they kill MySQL they could
alienate the open-source community, which loved Sun. If they keep it, they may
not have the ability to capitalize on it.
Third, client confidence. IBM’s consistent roadmaps and disciplined delivery enable
clients to effectively gauge the long-term value of their investments in systems,
middleware and services. Sun’s much-publicized business problems will not be
erased in the minds of clients by the Oracle acquisition. If anything, significant
questions are raised. For instance, the omission of any mention of SPARC in
yesterday’s statements from Sun and Oracle is certain to make Sun hardware
loyalists very anxious about a future where Oracle is calling the shots.
Earlier this month the latest of a long line of executive departures from Sun was
its lead processor designer who headed development of Sun’s long-promised and
much-delayed next-gen RISC processor, codenamed “Rock.” The future direction
of Solaris in the hands of Oracle is also unknown, while IBM’s substantial
investments in the future of AIX and Linux are ongoing and well known.
Finally, cost advantage. In today’s economy, clients are looking to reduce the
heavy maintenance costs associated with Oracle database use. IBM hardware and
software technologies together provide a significantly lower total cost of
Several Wall Street analyst reports yesterday saw Oracle’s move as defensive in
response to a dwindling ecosystem. Other observers see the Sun deal as an
attempt to emulate IBM’s successful solutions strategy. However, Oracle’s ability
to manage this type of integration is unproven. Oracle’s remains an application-
led play while IBM has a thriving software ecosystem of application developers
and a much different acquisition style.
Whatever changes take place within Oracle and Sun, one thing that remains
unchanged is IBM’s position of strength and our proven ability to win against both
More details on the Oracle-Sun announcement are posted on the Market Insights
Web site .
For more information concerning this article, please contact Smith, Bruce P.