Recession is here and companies around the world are struggling to stay afloat with some of them doing so on account of huge bailouts given by the Governments. Financial industry has been hit hard and IT industry is not far behind with job losses being the order of the day. Considering all these a acquisition of a company by another company is least expected but that is what has happened with ORACLE Corporation buying out Sun Microsystems for only a sum of 7.4 billion $
The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Oracle CEO Larry Ellison. “Oracle will be the only company that can engineer an integrated system – applications to disk – where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”
So what does this acquisition mean to the shareholders and IT industry at large?
Oracle — This merger does not work for me. I see only one reason why Oracle has acquired SUN ie to be a major hardware player and duke it out with the IBM’s and Dell’s of the world. Many experts feel that this is a game changer but the idea that Oracle will win with its own proprietary stack of technology—hardware, silicon, operating system, middleware, applications, service—is far easier said than done. Oracle’s shareholders will still be well-served in the end. For starters, with one relatively cheap deal, Ellison has now vaulted Oracle onto the leader board in the battle royale to own the cloud. Two days ago, it was a software company. Now, it’s a contender versus IBM, H-P, Cisco, Microsoft, Intel and others.
Microsoft — There was some talk of Sun’s loyal installed base moving to Windows long ago if it was going to. Same with Oracle in the database business, to some extent, vis a vis Microsoft’s SQL. But with this deal it will be very difficult for Oracle to win business from Microsoft. That’s because IBM, Dell and other computer makers—Oracle’s key partners in the past—will look for reasons to push other alternatives on their customers.
Jonathan Schwartz — He’s had a turbulent run as CEO of Sun, and his radical strategy for Sun never really worked. But i guess he has after all made his shareholders a reason to smile with this deal. It will be interesting to see if he stays in Oracle. The fact that he has a very difficult run in SUN, he might see this more of a reward than a punishment. A big thinker and effective communicator, it will be interesting to see what he can do with a company that’s not anchored down by as many strategic problems as Sun has been for the past decade.
Sun Employees —everyone goes Ga Ga over some mergers but this merger spells trouble for the Sun employees. We are talking of Oracle which has been ruthless in maximizing its profits and on the other hand there is SUN which is famous for ruthlessly minimizing them by refusing to make the huge cuts Wall Street has begged for over the years. So Sun employees be prepared for salary cuts and job losses.
Open Source — I love companies which promote Open source technologies and Sun has been one of them but with Oracle now acquiring it I’m sure Oracle will make a show of pushing MySQL, and will continue to offer it to accounts that insist on using it. Its just not about the two companies it’s about the CEO’s of those two companies. Jonathan Schwartz’ belief in the power of giving away software will quickly give way to Ellison’s belief in charging for it. Who knows, maybe Ellison will try to monetize Java by cranking up licensing fees. After all, most companies can’t do without it, and what’s the worst that can happen? Oracle rival IBM needs Java at least as much as Oracle does.
Computer Makers — To the extent that Oracle can pull together a soup-to-nuts offering for the data center, rivals such as IBM and HP have two bad choices. They can either lose the hardware business to Oracle’s new Sun-based offerings. Or they can resell Oracle’s software on their own boxes, undoubtedly on terms more attractive to Oracle as these distribution deals are rewritten in the years ahead.
Innovation — It was probably inevitable, but America lost one of the most innovative, swaggering, damn-the-torpedo’s companies in Silicon Valley history yesterday. Shareholders should rightly cheer, but the odds of Sun pulling off another revolution as part of Oracle, as it did with the workstation, the UNIX server and Java just got a lot more remote.
All round, the deal doesn’t sound like bad news for Sun customers: it’s better than Sun being bought by IBM, or going bust. However, some could soon find that Oracle’s sales droids aren’t the sort of pussy cats who’d gravitate towards Sun.