May you live in interesting times

Or so goes the ancient Chinese curse/proverb.

Well, it certainly wouldn't be a normal day for the tech industry without one company starting up, hiring, laying people off, going bust or merging with another.

Sun Microsystem's never really recovered after the 2001 tech wreck (check out the 10 year chart on Google Finance for illustration) so the GFC probably didn't have any executives there jumping for joy. In fact, checking out the 2008 cash position being down US$1.3b would have me jumping out a window if I was working there.

Having worked in the Sun ecosystem in Australia/New Zealand from 2000 to 2003, I can suggest a core issue was their transition from selling big servers to a more diverse portfolio of solutions (smaller servers, storage, software, services, etc). They just didn't seem to make that shift quickly enough - at least over here - which in turn put them behind the eight-ball for the coming software acquisition spree the company embarked upon.

So reading the news that Oracle is the winning suitor to acquire Sun (see MIS Australia, CNN, Bloomberg, more Bloomberg ) was interesting to say the least. This comes after IBM failed to agree on terms for an acquisition. Also noteworthy is the actual cost of the acquisition - it's a little less than the reported US$7.4bn, in fact it's around US$5.6bn once you factor in Sun’s cash and debt.

The positive aspect include a Oracle/Sun entity providing a more complete alternative 'stack' to IBM, HP and possibly soon-to-be Cisco. It also provides Oracle with some great software assets such as Java and mySQL. Strategically for Oracle, having IBM own these would not have been a great outcome (whereas Sun's ownership and inability to effectively leverage those assets was less of an issue).

Looking at the negative aspects, I'd imagine Oracle shareholders might be less than thrilled about being in the lower margin hardware game. One possible outcome here is that Oracle annexes that business to someone like Cisco, IBM, HP or Fujitsu. Having said that, most commentary indicates Oracle will keep the hardware.

I'd also imagine this deal will further dilute Sun's partnerships with other software vendors such as SAP who compete with Oracle on one or more fronts. It would equally dilute Oracle's partnerships with firms such as Dell. Realistically, knowing how dysfunctional these partnerships actually can be potentially negates this point.

Interestingly, about 14 hours after I wrote the blog content above, the article Top five predictions from the Oracle-Sun merger pretty much backs my points on hardware & alliances. If there anyone out there that doesn't think staff cuts are going to occur, please re-read my second paragraph of this blog again.


posted by Lee Gale @ 12:07 AM,


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