Oracle Snaps Up Sun

Signing what is essentially the same deal that IBM left on the table two weeks ago, Oracle is buying Sun for about $7.4 billion in cash, or $9.50 a share. Clearly, an IBM/Sun deal had more antitrust issues surrounding it, especially in the mainframe tape market. But I'm still impressed that a company many analysts were poo-pooing as damaged goods after IBM took a walk still got what was essentially the full asking price.

I'm also impressed that in today's credit market Larry Ellison and Co. can write a check for 7 gigabucks. The early news from Wall Street isn't entirely favorable, as Oracle's stock was down 50 cents at noon to $18.55. Sun has been trading right around $9 this morning since closing Friday at $6.69. Sun employees holding stock options with strike prices between $3 and $8 should be dancing in the streets of Silicon Valley after seeing the stock drop as low as $2.83 on Dec. 1.

While Oracle has grown via acquisition over the past few years, adding BEA, PeopleSoft, and Siebel Systems to broaden and strengthen its software portfolio, this will mark its first serious entr into the lower-margin hardware business. Chairman Larry even set up his pet storage project, Pillar, as a separate company, funding it out of his incredibly deep personal pockets rather than drive Oracle into the hardware business.

Oracle's always relied on Sun's Sparc/Solaris platform to host most production Oracle database implementations, but its recent forays into unbreakable/unsinkable/indestructible/invulnerable Linux and the HP Oracle Database Machine have shown an interest in hardware as a way to boost database performance.

Clearly, Solaris and Java will get a shot in the arm from having a stable home at what is primarily a software company. As a ZFS lover, I think this is a good thing, and I hope the rest of Sun's Open Storage initiative gets some Oracle love as well. I've been especially impressed with how they've been intelligently using Flash memory to address I/O hotspots.Also on the winners list should be MySQL. Even though it's open-source and may only bring in marginal revenues for enterprise licenses compared to Oracle's eponymous flagship, MySQL gives Oracle entré into SMBs and the millions of LAMP developers that may grow up to run apps that need more database server horsepower and may have used SQL Server as the next step up.

The future's less clear for Sun's traditional storage products like tape drives. All depends on how much Oracle wants to try to be the third soup-to-nuts IT provider, joining HP and IBM.

At least our world is never boring.

— Howard Marks is chief scientist at Networks Are Our Lives Inc., a Hoboken, N.J.-based consultancy where he's been beating storage network systems into submission and writing about it in computer magazines since 1987. He currently writes for InformationWeek, which is published by the same company as Byte and Switch.

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