Oracle Corp.’s (Nasdaq: ORCL) announcement last week that it plans to buy Sun Microsystems Inc. (Nasdaq: JAVA) raised questions about, well, almost every aspect of the blockbuster deal that would unite two Silicon Valley icons.
The only sure bets are that Oracle sees benefits in acquiring Java and the Solaris operating system — the only two Sun technologies mentioned as part of the announcement — and that thousands of additional Sun workers are likely to be laid off in order to meet Oracle’s ambitious profit goals.
It’s unclear, though, what will happen to the Java Community Process and Sun’s other open-source technologies, such as the MySQL database. The same goes for the Sun-dominated OpenOffice.org application suite and its Sun-owned commercial cousin, StarOffice. Whether Oracle really intends to become a full-fledged hardware vendor and chip developer is also uncertain. Another question on the minds of Sun customers is how the deal with affect their service and support.
In a brief conference call last Monday, Oracle CEO Larry Ellison outlined some of the reasons for the move and praised Java and Solaris — and largely left it at that. Ellison and other Oracle executives didn’t take any questions about their plans, leaving the details to be spelled out at a later date.
And that leaves some Sun users worried about what the future may bring.
Among them is Alfonso Rivera, manager of network engineering at Embarq Corp., a telecommunications and Internet services provider in Overland Park, Kan. Sun’s servers are generally more expensive than rival systems, Rivera said via e-mail. But, he added, the technology’s reliability and Sun’s “outstanding service and support practices more than offset the premium in hardware costs.”
Now, Rivera said, he’s concerned that Oracle will “undermine the Sun culture” and reduce the quality of customer service. If that happens, he said, the justification for paying Sun’s premium prices will disappear.
Alex Wingeier, chief technical officer at CLR Choice Inc., a Palm Coast, Fla., company that has developed a real estate search engine, said that he and other members of his IT team also have concerns about Oracle taking over Sun.
“We were not really keen on the fact that Oracle is buying Java, MySQL and OpenOffice,” Wingeier said. “We worry that they quite possibly could stop internal development on either one.” That seems highly unlikely in the case of Java. During the conference call, Ellison described that technology as “the single most important software asset we have ever acquired.” He also said that Oracle’s Java-based Fusion Middleware product line is the fastest-growing part of its business.
Essentially, Ellison boiled Sun down to two key assets: Java and Solaris. And if the Oracle CEO was going to thumb his nose at former Sun suitor IBM, one obvious way of doing that would be to talk up Solaris — which is exactly what Ellison did.
Many analysts didn’t think that IBM, whose talks with Sun broke down three weeks ago, would have had any real interest in keeping Solaris alive on top of its own AIX version of Unix.
But Ellison claimed that Solaris is “by far the best Unix technology” and noted that Sun systems are the most popular platforms for running Oracle databases.
On the other hand, Ellison didn’t make a long-term commitment to Sun’s Sparc hardware, instead calling Solaris “the heart” of the company’s server business.
In addition, he barely mentioned MySQL, a rival to Oracle’s flagship database that Sun acquired last year. External predictions about MySQL’s future are all over the map, with some observers saying it will thrive under Oracle and others expecting Ellison to throw it under the bus.
Not everyone is asking questions about the Oracle-Sun deal. Susan Walker, manager of enterprise computing services at St. Luke’s Episcopal Health System in Houston, said she thinks it will “give new life to Sun” and pose increased competition for IBM in the enterprise IT market. Walker added that she hadn’t had a good feeling about the prospect of IBM owning Sun.
But William Patterson, IT director at Nucor Steel Tuscaloosa Inc. in Alabama, said he’s unsure about the future of technologies such as MySQL under Oracle’s ownership. Patterson said that IBM would have been a better caretaker of Sun’s software products and that combining their hardware technologies “would have definitely made more sense” than the Oracle deal.
One group that the acquisition is sure to be difficult for is Sun’s workforce, which has already been hit hard by layoffs, including a planned cutback of up to 6,000 workers that was announced last November.
Sun lost $209 million in its second quarter, which ended in December, but it reported operating income of $114 million. Safra Catz, one of Oracle’s two presidents, said during last week’s conference call that the software vendor thinks it can run Sun at “substantially higher margins.” She predicted that Sun will add more than $1.5 billion in operating profits during the first full fiscal year after the deal is completed and $2 billion the following year.
Much of the profit gains will come via layoffs, said Toni Sacconaghi, a financial analyst at Sanford C. Bernstein & Co. Sacconaghi had earlier forecast $800 million in operating profits during Sun’s 2010 fiscal year, which is scheduled to start in July. Boosting profits to the level Oracle is shooting for, he said in a research note, will likely require cutting 5,500 to 10,000 more jobs at Sun.
Robert McMillan of the IDG News Service contributed to this story.
