Oracle Swings Away in a Market Forgotten

by: Pierr Johnson
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Oracle (NYSE:ORCL) has decided to cease support for Intel’s (NASDAQ:INTC) Itanium processor, which is used in the high-value, low-unit market for Unix Servers. The company says Intel itself plans to do the same and Microsoft (NASDAQ:MSFT) and Red Hat (NYSE:RHT) have already done so. Hmmm? Here are some of my favorite stocks and companies, and I somehow feel a dagger is out.

Well, I have been struck by the fairly thin reporting on this interesting issue, which is no doubt under the radar for many Tech readers.

The bigger story here is that Oracle has decided to force users who have purchased HP-UX-compatible database software and applications for Itanium-based hardware to migrate to its competing SPARC-based systems. The market for high-end Unix Servers is indeed small—no doubt less than 5% of the server market. But it is clearly very important to Oracle. For many months now, the company has purchased expensive front-page ads in the print edition of the WSJ to tout its superior performance in this highly competitive space. We have all seen them: Oracle’s Sun is likened to an F-22, IBM’s (NYSE:IBM) P7 to a formula one race car, and HP’s (NYSE:HPQ) Superdome to a tricycle! Or (as in today’s paper) HP’s Superdome leans leaking and crushed next to a barrel of industrial waste!

The story here to me seems to be that the sharp tone of this amusing hyperbole is now manifest in the hardware product strategy Oracle is adopting for its existing software customers. And it is striking that Oracle would concoct a dialogue regarding Intel’s aims so entirely at odds with the latter’s existing strategy, as no less than Paul Otellini (Intel's CEO) was sure to express.

That Microsoft and Red Hat no longer support Itanium can’t mean much, since high-end computing is the domain of Sun's Solaris, IBM's AIX and HP's HP-UX. Microsoft, Red Hat and Apache dominate the far larger market for horizontal computing. By contrast, the Unix Server market is deep. And in this domain, the very aggressive Oracle-Sun has indeed lost market share, as HP’s Dave Donatelli notes. But Oracle-Sun claims the performance advantage and, newly invigorated and well integrated, this entity is struggling to reverse the decline that arose in Sun’s final quarters as an independent company.

Users coerced to change will be dismayed by these fairly abusive practices. But forcing migration is a fairly standard practice in the software industry, at least with software. Of course this announcement could just be a tactic in the campaign Oracle features in its ads (noted above). Its fiscal yearend looms, after all. Either way, it will be interesting (and at times amusing) to see how this all plays out.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.