Oracle + Sun = Ellison Has Balls (but we already knew that)
I love when big things happen in IT. I was excited at the idea of IBM buying Sun - that acquisition just made a ton of sense. Of course, they both probably would have screwed it up in reality but on paper it looked good. Sun is a complicated beast and there are only a few companies that can fully comprehend it. There was some talk of Cisco buying Sun but as powerful and smart as Cisco is - they just are too far afield from Sun to add any real value to taming the beast. Why did Oracle buy Sun? According to Ellison - "Completely integrated computing systems, running Oracle and Solaris, should be even more successful and extremely profitable." The key is "integrated computing systems" - I take this to mean that they are going to provide fully integrated solutions from applications, OS, server and storage end-to-end nicely wrapped with services. Again, sounds compelling and valuable on paper but it only considers one aspect of the Sun beast. Here are some things to ponder: 1. Oracle is a software company and although Sun has a lot of software - it sells lots and lots of hardware. In fact, Sun has the model of giving away software to sell hardware. Personally, I think its backwards and the folks at Oracle probably think so too. Software and hardware are two very different animals in practical go-to-market ways and in emotional philosophical ways. If Oracle wants this merger to be successful they need to transition from a software-only to systems-oriented consciousness. Either that or shed the hardware (more on that later). 2. And let's remember that Sun has more than just server hardware - they have lots of storage stuff including TAPE libraries - all that stuff they bought from STK for a boat load of money. Tape is about has "hardware" as you can get. 3. Turn up the professional services while your at it. 4. Sun is a "beast" because of its wide range of products, services, divisions, mix of software + hardware, OEM agreements, varied pricing models, dysfunctional management and culture. Oracle is much more "pure" because of its focus - but that has now been instantly changed. With one action - Oracle went from being hyper-focused to becoming a beast themselves. When you buy a beast - you become one - not the other way around. 5. Oracle and Sun both don't play nice with VMware - either they come out with something competitive or they will be left out of the biggest and most important aspect of today's data center. 6. Oracle is now a competitor with HP and IBM as a total solutions provider - or could be. Can they be cooler, smarter, faster and more efficient than their competitors? Their best-in-class application and database software could give them an amazing edge. 7. On paper Oracle got a great deal for Sun. They get a ton of customers, revenue and intellectual property - they even get a bunch of cash. Oracle's press release stated the following - "The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun's cash and debt. We expect this acquisition to be accretive to Oracle's earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle's non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined". 8. The good news is that Oracle seems to be pretty good at acquisitions - the bad news is Sun is one of the worst at it. This isn't meant to beat up on Sun - but there is no question that this company could have been so much more than it is today - and the reason for that is due to bad management. Yes, few have ever accomplished what Sun has BUT that obviously just isn't good enough. Sun needs better right and left brain leadership - it needs to get over its engineering-driven culture - throw out dysfunctional bureaucracy - and lose the arrogance. And that is just to get back to par. If they want to rise to new heights as a part of Oracle - that will take true inspiration and perspiration. 9. Oracle stated that Java was one of the main reasons they bought Sun according to their press release - "Java is one of the computer industry's best-known brands and most widely deployed technologies, and it is the most important software Oracle has ever acquired." That is a powerful statement. Will Oracle absorb Java and Solaris and sell the rest? Or perhaps they can spin off a company that just supports the Sun hardware. They probably won't do either of the above "tomorrow" but it might be a smart long-term strategy to consider keeping the 'baby" and throwing out the "bath water". Don't get me wrong - I like hardware but Oracle is a software company and should probably stay that way. Personally I like this move just because it is bold. Do end users care? Right now I think Sun customers just want to be able to protect their investment in Sun without disruption. If this merger turns into more value for customers over time - so much the better.
No feedback yet
Leave a comment
|« VMware Coopition with Storage||The BD Event »|