Oracle Ambitiously Reaches for Sun

| Apr 21, 2009 | Competitive Intelligence Highlights

Event Summary

April 20, 2009 - Oracle Corporation and Sun Microsystems announced they have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash. The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt. The Board of Directors of Sun Microsystems has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.

Current Analysis Perspective
Data Center

Steve Schuchart Principal Analyst, Data Center

• Current Perspective: Neutral on Oracle’s acquisition of Sun Microsystems, because it remains unclear as to how Oracle’s acquisition could benefit Sun’s declining server businesses. Oracle has no real hardware experience, even though it is widely accepted that Oracle’s flagship database product runs best on Solaris and SPARC hardware. Until the transaction is finished, there will be some uncertainty regarding Sun’s hardware products, because it is possible that Oracle may sell those assets or radically change that end of the business.

• Vendor Importance: Very high to Oracle because of the software that comes with Sun, such as MySQL, Open Office, Solaris, xVM, and of course Java. From a data center hardware perspective, the acquisition does get Oracle into the server and storage business, but there is no indication that end of the business was of any great importance to Oracle, even though hardware accounts for the majority of Sun’s revenues.

• Market Impact: Very high on the data center hardware market in both servers and storage, because Oracle’s acquisition of Sun will mean changes to the server, storage, and virtualization market. How Oracle handles the acquisition and how committed it is to hardware and Sun’s xVM virtualization could mean increased competition or sale to another vendor. Regardless of how it shakes out, the market will see significant changes in customer attitude towards Sun’s hardware and virtualization products.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor, Competitor, and End User/Customer Actions

| Client access - Full report in Data Center | More information

Current Analysis Perspective
Collaboration and Conferencing

Brad Shimmin Principal Analyst, Collaboration and Conferencing

• Current Perspective: Slightly positive on Oracle's announced intent to purchase Sun Microsystems at $9.50 per share in cash for a total investment of $7.4 billion. Coming hard on the heels of IBM's failed attempt to acquire Sun for $9.40 dollars per share, this acquisition puts Oracle into direct competition with IBM, giving the vendor the hardware and software necessary to field fully integrated systems, spanning applications to disk. However, it takes Oracle into uncharted and treacherous waters as the vendor now must manage large-scale open source projects (most notably Java, OpenOffice, Solaris and MySQL) and do business as a systems vendor, using an acquired product portfolio that has been beset with financial difficulties since 2001.

• Vendor Importance: Very high to Oracle, as the vendor finds itself in possession of technologies that will allow it to address customer demands within the collaboration and conferencing marketplace for unified, appliance-based solutions, multi-channel software delivery (in-cloud and on-premise) and desktop productivity tools that can be tied to line-of-business applications. Whether Oracle decides to embrace these opportunities remains to be seen, as the vendor will not publish product roadmaps until the acquisition closes this summer. However, early indications are that Oracle will use Sun's assets to further, but not alter, its current approach to collaboration, which will leave a number of these opportunities underutilized.

• Market Impact: Moderate on the collaboration and conferencing market, because Oracle's public plans stemming from the acquisition of Sun do not prioritize Sun collaboration software. This, coupled with the highly overlapping nature of their core collaboration packages (Oracle Beehive and Sun Java Communications Suite), will initially create instability within the Sun customer base and partner ecosystem. Conversely, Oracle's ownership of key open source technologies such as OpenOffice and the Java standard itself, will create opportunities for existing and potential Oracle customers, as the vendor will be able to move these two communities into closer alignment with its own market objectives and product portfolio.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor, Competitor, and End User/Customer Actions

| Client access - Full report in Collaboration and Conferencing | More information

Current Analysis Perspective
Application Infrastructure

• Current Perspective: Slightly positive on Oracle’s acquisition of Sun Microsystems from an application infrastructure perspective, because it will move Oracle from being strictly a software vendor to being a soup-to-nuts IT vendor with a strong presence in the data center. This is no speculative move by Oracle. It is acquiring an established IT industry heavyweight that makes nearly $14 billion in annual revenue, a company that has been at the forefront of the TCP/IP networking revolution and the Java development revolution. Yet Sun is also company in crisis, which is why Oracle could buy it in the first place, and that presents formidable challenges to go with the opportunities.

• Vendor Importance: High to Oracle, because it is continuing to grow by leaps and bounds, positioning itself to compete head-to-head against IBM as the preeminent one-stop IT vendor. Oracle will be able to reach all the way into the data center when supplying enterprise solutions. On the application infrastructure side of things, ownership of Java and an improved in-house high performance story to tell customers represent tangible gains. The deal also opens the door for Oracle to pursue an aggressive SaaS-enablement strategy.

• Market Impact: Very high on the middleware and software and services market, because while the addition of Sun doesn’t add any new application infrastructure product segments to the Oracle portfolio, the size of the combined company and its reach across multiple IT market segments makes it a true industry giant. Rivals will hope this latest expansion by acquisition translates to girth rather than muscle, but Oracle has been extremely successful to date at absorbing large acquisitions.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor, Competitor, and End User/Customer Actions

| Client access - Full report in Application Infrastructure | More information

Top