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View from the Valley on Oracle/Sun deal
Oracle's announcement that it has sorted out a deal to buy Sun has sent tongues wagging in Silicon Valley.
The speed of the deal caught many by surprise. Steve Ballmer said he was "very surprised" by the announcement, but then again he's up to his neck in trying to buy Yahoo at the moment.
The deal may have been helped by the close friendship between Sun's founder Scott McNealy and Larry Ellison, and offering an extra $400m over IBM's reported bid price was also a strong factor in the deal.
But the devil is in the details. One of the major sticking points in the IBM negotiations was the willingness of Big Blue to defend the deal against anti-competitive regulations. If the IBM deal had failed Sun's stock would have tanked, just as Yahoo's did after the Microsoft merger fell through.
No-one yet knows, or certainly isn't telling, if Oracle promised to stand up and be counted if the regulators come calling. There are strong doubts that this is the case and one rumour currently doing the rounds is that Oracle will head off any regulator interest by selling off Sun's hardware business.
This makes some sense if you're Oracle. After all, it's a software business through and through. Ellison is not a hardware person and it's possible that Oracle scouts are already making calls to see if anyone wants, and has the cash, to buy up Sun's hardware arm.
However, the more we hear this the less likely it sounds. At a time when virtualisation is just beginning to have an impact on server sales the asking price for the hardware side would be low, and the major competition would all run into regulation problems of their own.
Instead our guess is that Oracle is planning to keep the hardware arm and become a one stop shop for server sales. This would mean Oracle could use the deal as an opportunity to shake up Sun's hardware arm and make it profitable.
In contrast to Sun's cuddly and laid back corporate atmosphere Oracle's management are ruthless cost cutters who are expert at trimming fat. These people could find excess flab on Calista Flockhart and if anyone can turn Sun's hardware into a cash cow it's them.
But the key prize for Oracle is the software, especially Java. Java is already key to Oracle's middleware, and Ellison has acknowledged as such. It also gives Oracle a part in the embedded device market that could prove useful in the future
The deal also gives Oracle control of MySQL. This may cause it some problems with the regulators but there's no reason why the MySQL can't run concurrently with Oracle's Database 11g; they'll just address different markets.
Of course the decision to move into the hardware business would put Oracle in direct competition with companies like HP and IBM. Both companies put a lot of cash Oracle's way and it could prompt retaliation, but on the other hand where else are they going to go? And no-one loves a fight like Larry Ellison.
The speed of the deal caught many by surprise. Steve Ballmer said he was "very surprised" by the announcement, but then again he's up to his neck in trying to buy Yahoo at the moment.
The deal may have been helped by the close friendship between Sun's founder Scott McNealy and Larry Ellison, and offering an extra $400m over IBM's reported bid price was also a strong factor in the deal.
But the devil is in the details. One of the major sticking points in the IBM negotiations was the willingness of Big Blue to defend the deal against anti-competitive regulations. If the IBM deal had failed Sun's stock would have tanked, just as Yahoo's did after the Microsoft merger fell through.
No-one yet knows, or certainly isn't telling, if Oracle promised to stand up and be counted if the regulators come calling. There are strong doubts that this is the case and one rumour currently doing the rounds is that Oracle will head off any regulator interest by selling off Sun's hardware business.
This makes some sense if you're Oracle. After all, it's a software business through and through. Ellison is not a hardware person and it's possible that Oracle scouts are already making calls to see if anyone wants, and has the cash, to buy up Sun's hardware arm.
However, the more we hear this the less likely it sounds. At a time when virtualisation is just beginning to have an impact on server sales the asking price for the hardware side would be low, and the major competition would all run into regulation problems of their own.
Instead our guess is that Oracle is planning to keep the hardware arm and become a one stop shop for server sales. This would mean Oracle could use the deal as an opportunity to shake up Sun's hardware arm and make it profitable.
In contrast to Sun's cuddly and laid back corporate atmosphere Oracle's management are ruthless cost cutters who are expert at trimming fat. These people could find excess flab on Calista Flockhart and if anyone can turn Sun's hardware into a cash cow it's them.
But the key prize for Oracle is the software, especially Java. Java is already key to Oracle's middleware, and Ellison has acknowledged as such. It also gives Oracle a part in the embedded device market that could prove useful in the future
The deal also gives Oracle control of MySQL. This may cause it some problems with the regulators but there's no reason why the MySQL can't run concurrently with Oracle's Database 11g; they'll just address different markets.
Of course the decision to move into the hardware business would put Oracle in direct competition with companies like HP and IBM. Both companies put a lot of cash Oracle's way and it could prompt retaliation, but on the other hand where else are they going to go? And no-one loves a fight like Larry Ellison.
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