The Register’s take on Microsoft and Oracle / Sun

The Register

Today I read an article on The Register by Gavin Clarke. This was about Microsoft’s potential response to Oracle’s proposed acquisition of Sun Microsystems and was entitled (rather cryptically in my opinion) Microsoft’s DNA won’t permit Oracle-Sun deal – Ballmer knows his knitting.

Gavin quotes Steve Ballmer, Microsoft CEO, as saying that his corporation will be “sticking to the knitting” in response to Oracle‘s swoop on Sun. He goes on to cover some aspects of the Oracle / Sun link-up; specifically referring to the idea of “BI in a box” that seems to be gaining credence as one rationale for the deal. In his words, this trend is about:

storing, serving, and understanding information […]: the trend for getting fast access to huge quantities of data on massive networks and making sense of it.

However mention is then made of co-offerings that Oracle and HP have teamed up to make in this space – surely something that would be potentially jeopardised by the Sun acquisition:

Oracle last year announced the HP Oracle Exadata Storage Server and HP Oracle Database Machine, a box from Hewlett-Packard featuring a stack of pre-configured Exadata Storage Servers all running Oracle’s database and its Enterprise Linux.

Returning to Microsoft’s response, the article stresses their modus operandi of focussing on software components and then collaborating with others on hardware. Refernce is also made to Kilimanjaro, Microsoft’s forthcoming SQL Server version that will further emphasise business intelligence capabilities.

In closing Gavin states that:

Acquisition of a hardware company would break the DNA sequence and fundamentally change Microsoft in the way that owning Sun’s hardware business will change Oracle.

It’s tempting to note that DNA is broken (and then recombined) millions of times by RNA Polymerase, that is after all how proteins are synthesised in cells; one characteristic of Microsoft’s success (notwithstanding its recent announcement of its first ever dip in sales) has been a willingness to reinvent parts of its business (else where did the XBox come from), while relying on a steady income stream from others. When it comes to the idea of Microsoft acquiring a major hardware vendor, I agree it seems far-fetched at present, but never say never.
 


 
The Register is the one of the world’s biggest online tech publications and is headquartered in London and San Francisco. It has more than five million unique users worldwide. The US and the UK account for more than 1.5 million readers each a month.Most Register readers are IT professionals – software engineers, database administrators, sysadmins, networking managers and so on, all the way up to CIOs. The Register covers the issues they face at work every day – in software, hardware, networking and IT security. The Register is also known for its “off-duty” articles, on science, tech culture, and cult columnists such as BOFH and Verity Stob, which reflect our readers’ many personal interests.
 

My thoughts on Oracle / Sun quoted by Computerworld UK and computing.co.uk

Computerworld UK

I was recently contacted by the UK arm of Computerworld asking whether they could quote from my thoughts on Oracle’s proposed acquisition of Sun Microsystems. I was delighted to accept and the resulting article has now been publsihed: Oracle’s Sun merger raises questions over MySQL, antitrust (my comments are on page 2).

computing.co.uk

Also, earlier my initial reaction to the news was also featured in Computing.co.uk coverage. I have had a long relationship with Computing and VNUNet in general. Other Computing articles referencing my work and opinions may be viewed on the Press Case Studies and Interviews page of the Public Presence section of this site.

This Public Presence section also features Vendor Case Studies, Videos (including one with Computing and Accountancy Age) and details of Seminars at which I have presented.
 


 
Computerworld, the world’s most successful media brand for IT managers, was originally launched in the US in 1969. Since then it has earned a world-class reputation by maintaining a sharp focus on IT management. Today there are 57 editions of Computerworld around the globe serving a combined audience of over 14 million IT professionals.Computerworld and Computerworld.com and the respective logos are trademarks of International Data Group Inc.
 


 
Computing and Computing.co.uk are published in the UK by Incisive Media and provide insight for IT leaders. Computing editor Bryan Glick tweets at http://twitter.com/bryanglick.

 

Combinatorics

The smallest bridgeless cubic graph with no three-edge colouring

Some of the furore following on from the announcement of the proposed acquisition of Sun Microsystems by Oracle appears to have died down today. However, taking a look round the blogosphere and various on-line discussion forums1, there does not seem to be much of a consensus about Oracle’s motivations, or future plans for Sun. There are a number of moving parts to this:

  1. Sun’s hardware platforms
  2. Solaris
  3. Java
  4. MySQL
  5. OpenOffice.org

One area that people seem agreed upon is the importance of Java to Oracle’s application strategy, so it makes sense – as a defensive move if nothing else – for them to seek to prevent influence over its future direction falling into the hands of a competitor (which in turn raises the question of when exactly Oracle and Sun started talking and how much overlap there was with the IBM negotiations).

The future of MySQL seems less clear. Some commentators feel that Oracle will support it and allow it to continue to thrive as one of their products. At the other extreme, I have seen suggestions that it will be killed off. Of course as an open source database, this might be easier said than done. There seems to have been a steady trickle of MySQL people out of Sun, pre-acquisition and I would have thought that there is enough expertise and ownership outside of Oracle/Sun for MySQL to have some sort of future regardless of Oracle’s strategy for it.

A bit of a dark horse is OpenOffice.org. A lot of commentary has focused on Oracle positioning themselves to compete with IBM via the acquisition. Perhaps OpenOffice.org offers Larry Ellison another chance to cross swords with his old adversaries at Microsoft.

Moving from software to operating systems, Sun’s Solaris has probably suffered more than most from the rise of Linux, but there have been rumours about Solaris offering Oracle a better route to the current technology Nirvana of cloud computing. Whether this is really the case, I’ll leave to more technically competent authorities to discuss.

But beneath Solaris beats the SPARC chips and other components of Sun’s hardware. Is Oracle’s real aim to offer a complete solution: ERP, CRM, BI and DW in a box? Sun’s hardware has not exactly been flying off the shelf in recent months, but perhaps the sales team at Oracle have other ideas. Maybe their feeling is that all that Sun’s boxes need is to be part of a more alluring overall package. Leveraging Sun’s hardware and operating system is what many people assume is behind Oracle’s strategy. This is certainly the path that would lead to challenging IBM as a company that can meet many of an organisation’s needs as a one-stop-shop.

However, this segues into another observation. If Oracle really has IBM in its sights, then it lacks one crucial piece of ammunition, a global services organisation; the sort of outfit that IBM acquired from the hiving off of PwC’s consulting arm. Maybe now is a good time to but stock in CSC?

But to return to some of the points I made earlier, there is a further possibility. Perhaps Oracle don’t want to move into the fiercely competitive and low-margin arena of hardware sales after all. Perhaps it was Sun’s software assets that were the real goal. Does Oracle really want to position itself as a hardware vendor, no doubt poisoning strong relationships with people such as HP in the process? Maybe not. If this is indeed the case then maybe there will be a spin-off of Sun’s hardware assets, or indeed a sale to someone like HP – assuming that they wanted them.

One of the most intriguing aspects of Oracle’s proposed acquisition of Sun is just how many balls have been thrown up into the air by it. It will be really interesting to see how they fall over the next few months.
 


 
1. Some of the blogs that I have read on this subject are acknowledged at the end of my earlier article.

A further main source has been comments on various LinkedIn.com groups, notably: CIO Forum (CIO.com and CIO Magazine), CIOs.com: Chief Information Officer Network and The IT Architect Network. As always, membership of LinkedIn.com and the group is required to view these.

Finally, you can sometimes glean a lot from 140 characters, so various comments on Twitter have also been influential.

 

Mergers and value

and they all lived happily ever after?

Today’s big news is of course that Oracle and Sun Microsystems “have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash.”

As Sun’s press release goes on to say, “the transaction is valued at approximately $7.4 billion”. At the time of writing, Sun’s stock was up nearly 36% and Oracle‘s was down just over 1%. The price Oracle is paying represents a 42% premium over Sun’s closing stock price on Friday – that’s a big premium.

What is interesting is that the previous mooted IBM / Sun deal appears to have foundered at least partly on issues of price (though potential antitrust issues were also a concern). IBM was rumoured to have offered a price identical to what Oracle will now be paying. So what, taking Larry Ellison’s deep pockets to one side, was the difference?

Well while there seemed to be some synergies for IBM in the earlier deal (a big say in the future of Java obviously being one that would have attracted both suitors), the acquisition of Sun is unarguably a much more transformational event for Oracle. Despite Sun’s recent problems in shifting big iron (funny how UNIX platforms are now viewed that way isn’t it?), Oracle post-acquisition will have a product set ,matched by few companies. In fact it will probably be matched by only one: IBM. So, while buying Sun might have made business sense for IBM, it would not have changed the nature of the organisation overnight. Oracle’s announcement today would appear to have done just that, positioning them as the other big beast in the “buy everything from us” jungle. Whether this deal proves successful for all concerned (and not just Sun’s shareholders) is a question whose answer will probably not be clear for a long time.

A comparisson of Oracle and Sun's positions with key competitors in the Forbes Global 2000
A comparisson of Oracle and Sun's positions with key competitors in the Forbes Global 2000

Stepping back from all this IT fervour for a moment, it is perhaps instructive to compare the merger madness that seems to have taken over the sector with trends outside the technology industry. Here the picture is very different. Over the last 10 years the majority of sprawling conglomerates have been split up; previously cherished businesses have been spun off, or sold to competitors. This has all been in homage to the business school orthodoxy of focus and core competencies. Many an internationally renowned name now sells just a fifth of its previous product set, with other assets now owned by those who can presumably generate greater profit from them and who feel that they are more compatible with their own core strategy. Deals where two similar companies have swapped assets and businesses to create two more distinctive entities have been common. While it is always notoriously difficult to assess the impact of such trends, general opinion seems to be that this phenomenon has generated greater value (or at least destroyed less value) than the previous focus on mergers and acquisitions.

So where does this leave IT with its rash of mega mergers over the last couple of years? Well it could of course be argued that IT itself is a single sector (and thus an area of focus and core competency) and that mergers within the technology sector are not the same as say a consumer electronics firm taking over a Hollywood studio (Sony / Colombia TriStar) or old media taking over new (TimeWarner / AOL). But many elements of Sun and Oracle’s businesses are quite different from each other. Ellison must believe that he can run a more diverse stable and still breed winners. The track record of Oracle successfully managing acquisitions is mostly impressive, so he may have a point. Perhaps bucking the trend towards being highly focussed is a masterstroke. The merger may prove to be a Waterloo for the world’s third biggest software and services firm; but whether they are playing the role of Wellingtion or Napoleon remains to be seen.
 



 
Continue reading about this area in: Combinatorics.
 
Much of the following was originally conatained in a comment, but I then thought that it was more appropriate to add this to the main article.

Some thoughts on this area from bloggers that I follow:

I will add more as I come across them.

Also here is an interesting graphic from MySQL.com, which (if you believe it) shows the impact of the Sun acquistion on Oracle’s market share:

UPDATE: The above chart reflects: “According to the recent JoinVision study ‘Open Source in the Fast Lane’, IT specialists indicated they deploy MySQL 30% more frequently than Oracle, SQL Server or DB2.” Not quite the same thing as market share.