Mafeking

Oracle Acquisition of Sun Makes Perfect Sense

Sun has three broad business areas: Hardware - servers and chips, software - Java and associated frameworks and Services - a reasonable professional services outfit.

Oracle can improve the efficiency and profitability of the Sun services organization and move their (Oracles) more aggressive and costly professional services people into that space. There is money to be made in this area.

But the other two areas are more problematic.

In hardware Sun is losing market share to the increasing power of the mulit-processor Intel and AMD chip sets. Certainly the Sun Sparc and n-way architecture has greater performance, but this performance is only required in very demanding areas. Oracle has bought a declining business in this area that is likely to go head to head with HP's servers (not cooperate with HP). I am not sure Gardner is correct in his assessment here.

Sun's software offerings are another story. Sun invented (Gosling, et. al.) Java, Java libraries and Java frameworks that created almost a revolution in the software industry by improving software portability and robustness. But has never been able to truly monetize the Java story. I suspect the Sun software unit is not profitable. The forces of Open Source Java have just been too strong.

So Sun's software business is also a story of declining profits.

In the final analysis I think Ellison has bought Sun for their customer base and the synergies and penetration that Oracle can achieve into the Sun accounts and customers. Oracle is not going to make a lot of profit from Sun's hardware and software.