Subba’s Serendipitous moments

April 20, 2009

Oracle acquires Sun — Unexpected and interesting

Oracle announced that it is going to acquire Sun for $9.50 in cash valuing Sun at about $7.5 billion or $5.6 billion net of Sun’s cash and debt.

The deal comes after talks between IBM and Sun failed. I had analyzed why the IBM may not really need Sun here and here. IBM had offered $9.40 per share. Oracle’s offer is a 40% premium over Sun’s closing price.

However this acquisition by Oracle is both unexpected and very interesting. Sun’s software assets could become better strategic assets to Oracle than Sun’s server or storage business. After Sun acquired MySQL , the relationship between Oracle and Sun had soured. Oracle had acquired Innobase to neutralize MySQL but it hadn’t made much headway. Of course Java could become the pivot of Oracle’s middleware strategy.

The open source database angle becomes interesting. Having MySQL in its stable gives Oracle access to its huge developer base and web applications market. Will Oracle kill MySQL to protect the Oracle 11g cloud margins or milk it for whatever it is worth before allowing it to die in neglect will be interesting to watch.

Sun has a large installed base and becomes an immediate target market for Oracle to target with its applications.

Since Sun’s manufacturing is already outsourced, there’s nothing much left for Oracle to do. It can sell whatever is left in the hardware business — the storage, server and any other chip business to either HP or Dell.

Oracle now fine tunes the database performance on Solaris and sells a combo. HP and others will feel the impact.

Oracle gets the scale and muscle to attack IBM.

On the overall, there seems to be a better strategic fit between Oracle and Sun, than Oracle and IBM. Both companies also have a strong feisty culture and hyper competitive spirits so integrating them could be easier.

What is also interesting is that Sun’s board approved the deal quickly and unanimously after just scoffing IBM’s deal which was just 10 cents less per share.


April 6, 2009

IBM — Sun deal fails?

Filed under: Business,Competition,Model — Subbaraman Iyer @ 11:35 am
Tags: , , , , , , , , ,

IBM withdrew its $7 billion offer for Sun reports the NY Times which reports that Sun believed the offer was too low and the offer was rejected by the Sun Board. The Wall Street however is not so categorical about the rejection and believes the deal will go through.

I wrote earlier that IBM doesn’t need Sun. It is Sun that needs IBM. Sun has been in the market for a long time courting probable suitors.

The failure of the deal will hurt Sun more than anyone. Customers will be wary of purchasing Sun gear. Moreover the management will be questioned about their commitment to a go-it-alone strategy. Hence Sun may accept the lower price offered by IBM. Sun doesn’t have much choices left.

My assessment is that Sun’s problems may actually worsen after the failure of the talks. IBM comes out unscathed.