'Industry in a box:' Sun acquisition will lead to Oracle Java

After spending decades waking up every morning, as Scott McNealy's old keynote speeches used to repeat, thinking singularly of how to slay the beast that is Bill Gates, his company finds itself this morning swallowed by Larry Ellison. Signifying the apparent catastrophic collapse of Sun Microsystems and IBM to have come together, in bargaining efforts that both sides vehemently and vociferously declined to comment about, Sun has agreed to be acquired by Oracle.

"One of the key reasons that Oracle's acquisition strategy has been so successful is because we buy companies with market-leading products," stated Oracle CEO Larry Ellison this morning, literally parading his latest acquisition like the latest trophy among many, or like a big game fisherman hauling in a shark. "PeopleSoft was #1 in human resources. Siebel was #1 in customer relationship management. BEA's WebLogic was the #1 Java virtual machine. Hyperion was #1 in enterprise performance management. And so on. Sun Microsystems has a variety of exciting products, but two of their software products -- the Sun Solaris operating system and Sun's Java programming language -- were instrumental in Oracle's decision to acquire Sun."

That decision will translate to a cash acquisition valued at $5.6 billion up front, and $7.4 billion including debt acquisition, translating into $9.50 per share. That's the same number that a huge variety of unconfirmed, though probably accurate, reports said was Sun's final offer to IBM, before IBM reportedly dropped its bid to as low as $7. Oracle Co-president Safra Catz this morning sized up the latest trophy as somewhere in the middle, probably not its most glorious catch: "Larger than Hyperion, and smaller than either BEA or PeopleSoft," Catz reported.

The only two elements of Sun that were on Ellison's mind this morning were Java and the Solaris operating system. "Sun's Java programming language is one of the computer industry's best-known brands, and most widely deployed technologies," stated Ellison. "Java runs on hundreds of millions of personal computers, cell phones, even DVD players. Oracle's Fusion middleware -- our fastest-growing business -- is based entirely upon Sun's Java language and software. As a result of this acquisition, Oracle can increase the investment in Java technology that is so critical to our continued success in middleware, and our next generation of Fusion applications. We believe that Oracle's middleware business is on track to be as large as our multi-million dollar database business. Java is the foundation of Oracle's Fusion middleware, and the single most important software asset we have ever acquired."

Solaris -- clearly the second banana in this deal -- was praised by Ellison for being the best UNIX in the market, and the biggest platform for deployment of Oracle database applications -- bigger, Ellison noted, than Linux. There's a reason for that, and unsurprisingly, Ellison did not mention its name.

Jonathan Schwartz did. The person known up to today as the CEO of Sun, and whose final title -- along with Scott McNealy's -- remains unknown even now (no questions were taken during the conference call), mentioned MySQL but almost as an afterthought. Sun acquired the leading open source database in January 2008.

"The transaction...positions Oracle into the world's largest supplier of open source software," read Schwartz, in one of the eerier declarations of the morning, "with technology brands known by students, startups, and developers across the world, from Java and OpenSolaris to MySQL and OpenOffice. There is no question in my mind that this transaction redefines the industry, redrawing the boundaries that have frustrated the industry's ability to solve the problem that desperately seek to solve, eliminating the cost, complexity, and inefficiency that results from an industry focused on components rather than systems.

"This combination will position Oracle to drive an industry phase-change," stated Schwartz at another point, "collapsing traditionally disparate market segments -- servers, storage, and networking -- into a cohesive whole leveraging Sun's pioneering systems innovations, anchored, as Larry mentioned, by the open source Solaris operating system. No other company will be capable of understanding, architecting, and providing solutions that span applications and middleware to the highest scale and highest value data centers on Earth."

Last week, financial analysts had speculated about Sun's frustration and inability to solve the problem that it desperately sought to solve: the elimination of cost, complexity, and inefficiency...specifically amongst its own workforce. A Sun/IBM combination, some wrote, would effectively have outsourced the problem of layoffs to a company that actually has a business unit that helps customers downsize. But what choices IBM may have made, and in what departments, was anyone's guess. Now, the Oracle/Sun grafting leads to a much clearer, easier to predict picture of what business units are going, where, and why. The mention of MySQL only once, and the explanation of Java by Ellison as a critical middleware component instead of the all-around applications platform that Sun perceived it to be -- something which, in his mind, demanded fusion with Fusion -- should present even the most amateur observer with a black dotted line marking where portions of Sun are likely to be torn off and discarded.

Sounding like one of the discards this morning, an exasperated Sun Chairman Scott McNealy read from his card as though he were a hostage held in a foreign land demanding ransom: "Sun and Oracle have been pioneers and partners for way longer than I like to think about," he began, "over 20 years, and today we're coming together for the next phase of computing. In the last few decades, our shared customers have relied on us to solve their business challenges with new innovations, and today marks the next big step in that effort." From the man who seemed, in an earlier time, to run purely on adrenaline, especially during his keynote speeches which lashed at Microsoft like Ahab against the White Whale, the sound of his voice spoke nothing but defeat.

In what turned out to be the metaphor of the day, Oracle Co-president Charles Phillips closed the call by showing the world exactly where Sun is going, and how soon: "With this acquisition, we can engineer a true system with consistency across all of [our] products. Beyond that, the potential for innovation across all these products is truly exciting. Our joint organizations are already coming up with ideas...We could add value by delivering ready-to-deploy servers for target industries -- retail, comms, banking, etc. With a complete industry in a box, we could also enable ISVs to deploy their applications on an Oracle Solaris appliance. Sun's Open Storage platform is very similar to Oracle's Exadata database storage platform; both products use standard servers, commodity disk, and InfiniBand interconnects to lower the cost of storage while improving performance. This is a disruptive technology growing quickly for both companies, and storage will be an expanding market for years to come. We can now deliver a complete system for creating, managing, storing, archiving, and restoring data. Lastly, there are exciting opportunities around Java."

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