Is Oracle serious about hardware?

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?

SHARE:
TOPICS: Servers, Hardware, Oracle
16

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

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

Talkback

16 comments
Log in or register to join the discussion
  • The tech landscape is starting to look like the oil industry

    Where 3 or 4 companies own it all. Its not all bad as long as innovation continues. But i hate to see open source products (whenever they get popular) get sucked into the mix. MySQL etc.
    pcguy777
  • I completely agree

    I suspect there was more to killing MySQL than about hardware. As much as I dislike the now very buggy MySQL, I do like competition and I think this was a move to squelch that.
    bnordberg
  • RE: Is Oracle serious about hardware?

    No, Oracle wants Sun's single jewel, the core of all mobile apps: java. It was undervalued in Sun's portfolio. Who knows if they are going to turn it into a revenue source or not.
    pickespu
    • End of free Java?

      Is that what you see. Interesting take by the way.
      LBean
  • RE: Is Oracle serious about hardware?

    After listening to Oracle's analyst conference call and thinking about the situation, I think that Oracle will invest in the hardware business. Is this because they think that the future is in hardware? Not necessarily. I think that they will invest in hardware as a means for packaging their software into solutions for its customers. This is a trend that I am seeing across the board. I published a blog entry yesterday (http://tiny.cc/n5Mji) about the proposed Sun acquisition and plan to write more today.
    JHurwitz
  • RE: Is Oracle serious about hardware?

    So what exactly is Oracle buying? It seems like if you sell off the server business and the SPARC IP, the only thing left is software IP and a customer list. Solaris is essentially UNIX-SVR4 and JAVA is, well, JAVA. Doesn't leave much else for $7 billion.

    If Oracle has moved into the Server business, then offering an Oracle-Solaris-SPARC hardware/software solutions for the high-end seems like a perfect fit for going against the other big players.

    Add to that Sun's Solaris and OpenSolaris offerings on generic Intel/AMD hardware, and you can fill in the mid-range to go along with the "low-end" Windows & Linux offerings.

    It seems to me like keeping SPARC would be a smart move. Selling it off precipitously seems like it would be a short-sighted move.
    M Wagner
    • Oracle will also get:

      MySQL, xVM, SAM-QFS, ZFS, Star(Open)Office, Glassfish, FISHWorks (OpenStorage), Secure Extensions for Solaris, an excellent line of AMD and Intel servers (such as the x4600), StorageTek, and I'm sure I've missed some. All of these are tools that could fit well into Oracle's line of offerings.
      914four
    • Java, Legacy?

      It's Java, not JAVA!
      So what exactly is Oracle buying? IP and one of the largest concentration
      of PhDs in a company (assuming they will stay). Oracle products like
      Coherence and JRockit will nicely complement the Sun portfolio in the
      Java realm. To wit, Oracle paid more for BEA than they will for Sun, I
      don't recall that there were many people questioning the BEA acquisition
      (BEA is now pretty well integrated in the Oracle line up).
      Eleutherios
    • Ellison's Designs

      Larry has been underestimated (drastically in my opinion) in the past. Once he does whatever he plans to do, and makes a huge profit at it, we'll all be saying "oh, now I see it."
      LBean
  • RE: Is Oracle serious about hardware?

    vertical integration of web, database and storage
    assets in a content delivery platform would deliver
    huge performance and implementation benefits to
    customers.
    cliffhannel
  • RE: Is Oracle serious about hardware?

    Oracle couldn't care less about hardware and its partner HP will simply consign most of the hardware line to the dust heap of history. Some server systems may continue, and may even improve a little, but I don't believe the play for SUN was made due to hardware.

    What I'd like to know is why was Cisco asleep at the wheel when IBM failed to finalize a takeover? That seems a much better match for SUN and for current SUN systems houses.

    The comment about SUN "mostly outsourcing their systems", meaning Intel and AMD processor based system boards suggests that Oracle doesn't find anything particularly interesting about SUN technology implimentations. Certainly SUN Blade servers are not shabby in my experience, but buyouts aren't necessarily for the purpose of using another's technology. Often it is about getting rid of competion.

    The surprising thing is that once a company makes the choice to buy and ditch another company's technology, they have done other competitors a favor, placing themselves back on a level playing field when they thought they'd be ahead.

    Roger W. Norman
    RWNorman
  • RE: Is Oracle serious about hardware?

    Yes. So many years that Oracle has dabbled into hardware it failed in a sense of the word but had spun of the hardware companies that it created. However with Sun which is successful, in technical terms & financial, so Oracle can jump into hardware market without the pain of starting a new hardware division. I would interested how does Oracle handle "competing" products like MySQL. I wish that Oracle will not kill them but spin them off so they still can be develop and grow.
    phatkat
  • RE: Is Oracle serious about hardware?

    I don't think Oracle is interested in the HW business. They
    will probably sell the HW business to a non-competitor (Dell
    maybe?), and keep the SW part of Sun.

    Oracle has done a great job in positioning themselves as
    industry-specific solutions vendor, the HW is redundant in
    their case.
    georgimilev
  • Never mind hardware, does this mark an end to free Java

    Forget about hardware, oracle probably has plans to hive off that part of the business. Is Oracle more interested in control over Java?
    Knowing through observation and experience that Oracle's great love is really milking their customers for all they are worth in maintenance charges from their software product line, will oracle try to pull a swift Uturn and turn Java into a revenue cash cow?

    How many would you pay for Java if that was the only way?
    mandrake64
  • The Deal may be at Risk of Being Killed by the Government

    Even more worrisome is what the fate of mysql will be. It appears that mysql has the potential of being the strongest competitor to Oracle. IBM's DB2 and Microsoft's SQL Server are tiny compared to the Oracle mysql combination, especially if Oracle decides to kill sql. This, alone, would make the deal a no-go. It will be interesting to see if the deal will be selected for intense review by the Justice Department and the Federal Trade Commission! It is true that Oracle's application language extension is very appealing and robust, but the cost advantage of mysql is still very substantial now.
    lcarliner9
  • RE: Is Oracle serious about hardware?

    Being Serious about Hardware, or not, is pretty irrelevant in this case. The key point is Oracle wants to make $1.5b from SUN in the first year. Once you ask yourself how, you quickly realise this will be done off the back of hardware. This blog contains some interesting numbers;
    http://community.zdnet.co.uk/blog/0,1000000567,10012550o-2000649542b,00.htm
    SUN makes a large margin from its hardware business, its problem is its expenses are huge. Most of these expenses can quickly and easily be paired back to get your $1.5b because they are not essential to its hardware business. SUN's software and non-hardware services revenue is less than $1b, this is unlikely to generate $1.5b of profit. The remaining piece is hardware ? so I will leave the reader to decided how reasonable this article is.
    smycroft