The prize in Oracle's acquisition of Sun Microsystems is Java, but the big question is whether Larry Ellison and the gang can monetize the popular platform and bolster its standing against up and coming programming languages.
In a research note, J.P. Morgan analyst Adam Holt examines Oracle's Sun purchase and how Java plays into the mix. Holt writes:
Based on our conversations with Oracle partners and Sun contacts, the importance may be primarily in developing/sustaining the end markets for their middleware technology, rather than increasing the direct monetization of Java. Given the relative scale of Oracle’s middleware business, which IDC estimates at $2.3B in 2008, versus the $220M in Java related billings Sun accrued, the potential returns are far greater in investing in the end-markets than monetizing Java, in our view.
Oracle's challenge will be getting Java's momentum back once the Sun deal closes, argues Holt. Java has become monolithic relative to new languages such as Ruby and application frameworks such as Springs and Seam. Oracle has promised to invest more in Java. Holt adds:
While Java enjoys widespread adoption today, particularly in enterprise applications, a monolithic architecture and complicated development process have resulted in rather slow evolution of the Java platform, particularly for new use cases and computing form factors. This has left room for a raft of new languages like Ruby and Groovy, and new application frameworks like Spring and Seam, to emerge to fill that void, particularly in the fast growing markets around the development of web 2.0 applications. Most agree this has sapped momentum from the Java ecosystem. In order to safeguard the future of the core market for its middleware technology, it makes sense for Oracle to more directly invest in Java itself.
The big question is what Oracle's returns will look like from its Java investment. Here's where Sun monetized Java:
The big takeaway from that chart: More than half of Sun’s Java related revenues come from licensing fees for the Java Mobile Edition virtual machine to 30 mobile phone companies. That market is saturated.
For Oracle, Java investment will turn up in the middleware business.
In any case, it will be hard to follow the Java money within Oracle. Holt reckons that Oracle will monetize Java better than Sun, but the mobile market is saturated, the third party toolbar opportunity is relatively small and the model for Java support is sketchy.
If Oracle has any shot of monetizing Java it will be in that latter category. Oracle could offer enhanced support for Java and pay per use services, says Holt.
Here's Ellison talking about the future of Java development: