Oracle's Sun buy: Ellison praises Solaris, thumbs nose at IBM

Oracle CEO says Sun's OS is 'by far the best Unix technology' available, cites Java as a key component of $7.4B acquisition

Oracle Corp. may have decided to buy Sun Microsystems Inc. because it is worth far more to the database market leader than it was to IBM. It's not a question of the price — at $7.4 billion, Oracle didn't agree to pay much more than what IBM was reportedly considering. But Oracle may have more use for Sun's technology than IBM ever did.

In explaining his decision to make the acquisition today, Oracle CEO Larry Ellison boiled down Sun into a company of two key assets: Java and the Solaris operating system.

IBM wanted Java and especially Sun's enterprise customers. But many analysts didn't think that IBM, whose talks with Sun broke down two weeks ago, had any real interest in keeping Solaris alive on top of its own AIX version of Unix and Linux, which it broadly supports.

And if Ellison was going to thumb his nose at IBM, one way of doing that would be to praise the heck out of Solaris — which is what he did during a conference call this morning.

"The Solaris operating system is by far the best Unix technology available in the market," Ellison said. "That explains why more Oracle databases run on the Sun Sparc-Solaris platform than any other computer system."

If IBM had bought Sun, it would have created an opening to expand use of its DB2 database running on AIX at Oracle's expense.

But Ellison didn't make any long-term commitment to the Sparc hardware: He called Solaris "the heart of the business" for Sun. And while Oracle sees the acquisition as giving it the ability to sell ready-made systems out of the box — "complete and integrated computing systems from database to disk," as Ellison put it — that doesn't mean those systems have to be sold on Oracle-branded hardware.

Nonetheless, analysts said that even if Oracle doesn't see much of future in Sun's hardware, the road map for Sparc systems may well extend a decade or more.

Java's importance to Oracle is already apparent. Oracle is a major middleware vendor, and Ellison said that the company's Java-based Fusion Middleware technology is the fastest-growing part of its business.

But what will become of Sun's many other technologies? For one, Ellison barely mentioned the MySQL open-source database, a rival to Oracle's flagship software that Sun acquired last year. No questions were taken during the conference call, making it impossible to press Ellison on that issue.

The conference call, which started at 5:30 a.m. Pacific Time, also included Sun Chairman Scott McNealy, who co-founded the company in 1982, and Jonathan Schwartz, its president and CEO.

The two Sun executives read through their prepared remarks quickly. And although McNealy praised the merger, saying, "We're thrilled to be acquired by Oracle," it sounded a little perfunctory.

This likely will be a difficult time for Sun employees who have already been hard hit by layoffs. Safra Catz, one of Oracle's two presidents, said during the call that the software vendor thinks it can run Sun "at substantially higher margins," but she didn't detail how that will be achieved.

Charles Phillips, Oracle's other president, said the feedback that company officials have gotten the sense from customers that they want reduced complexity in their systems. Buying Sun, he added, will provide end-to-end systems integration that will enable Oracle to "engineer a true system which works consistently across all these products."

Copyright © 2009 IDG Communications, Inc.

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