Is Oracle serious about hardware?

Summary:Oracle's acquisition of Sun Microsystems brings a sizeable hardware business to Larry Ellison's gang. The larger question is how serious is Oracle about Sun's hardware?

Oracle's acquisition of Sun Microsystems brings a sizeable hardware business to Larry Ellison's gang. The larger question is how serious is Oracle about Sun's hardware?

On a conference call with analysts (Techmeme), Oracle executives just happened to mention that Sun's manufacturing was outsourced. That mention was notable because it means Oracle can pick and choose its hardware spots, unwind some systems and sell others. 

Enterprise Irregular Anshu Sharma mentioned on our group mailing list that Oracle may have valued Sun's hardware business at zero. Yup. Zip. Zilch. Nada. Sharma notes:

  • Oracle keeps all software parts of Sun.
  • Sells off or shuts down hardware business with bad margins. Perhaps Oracle partner HP would want a few chunks. EMC may want some storage lines. And any chip maker would want the Sparc intellectual property. If the market rebounds private equity may be interested. 
  • Oracle would hang on to a few hardware lines to build its uber-database-data center machine. 
  • The HP Exadata machine with Oracle keeps going. 

If you're wondering how Oracle would improve Sun's margins in the first year selling off hardware lines may be a good place to start. Oracle's contention that it can make Sun its most earnings accretive acquisition every either means that Sun was way inefficient (partially true) or Larry Ellison is going to dump the weak businesses. Burton Group is also in the camp that believes Oracle will unload Sun's hardware businesses and Bob Warfield predicts a major shakeup ahead

Is Oracle really up for the server dogfight? After all, Deutsche Bank analyst Chris Whitmore foreshadows a hellish server fight ahead. Forget about profit margins. Forget about sales increases. And advancements like cloud computing and virtualization all mean that fewer servers will be sold in the future. 

Whitmore writes:

Both Cisco and Oracle have recently entered the server market. As a result, we expect competition to intensify significantly over the next few quarters. This is most negative for HP, Dell and to a lesser extent, IBM. While the market is not terribly attractive from a growth and margin perspective, it is still strategic to Cisco's and Oracle's broader datacenter opportunities.

In other words, servers will just be tacked on to other stuff. Whitmore also adds that Sun's server business may require "incremental investment, or face more share loss." Look for Oracle to do a little pruning before it blows any dough on Sun's hardware business.

Other threads: Perhaps Oracle's purchase of Sun is just a step on the way to offering services like IBM

Oracle buys Sun coverage:

Oracle buys Sun; Now owns Java; Becomes a hardware player

Topics: Servers, Hardware, Oracle


Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.