Sun acquires MySQL; Adds to its software stack

Updated: Sun Microsystems is taking the plunge into the database market with the purchase of open source database developer MySQL for $1 billion ($800 million in cash in exchange for all MySQL stock and assumption of approximately $200 million in options).

With the move, announced Wednesday, Sun takes a big leap into the $15 billion database market and pits it against the likes of Microsoft, IBM and Oracle. MySQL (all resources) also gives Sun entry to some customers that may be interested in buying more equipment and software. MySQL counts Facebook, Google, Nokia and Baidu as customers.

During a conference call this morning Sun and MySQL executives sang kumbaya. On the call, Sun CEO Jonathan Schwartz called the MySQL deal the "most important acquisition in history of company" and added that the database firm will have "a central role" as Sun rolls out its open source strategy. Sun is in the process rolling up a complete open source stack, becoming the largest open source organization of world.

Here's what makes MySQL interesting to Sun. About 20 percent of MySQL deployments run on Solaris, according to Sun estimates outlined on a conference call. Seventy five percent of MySQL deployments are not on Sun hardware. That gives Sun an opportunity to bundle hardware software and services. Although Schwartz noted that the software and hardware business operate separately MySQL could give Sun some leverage as customers look to consolidate vendors.

Sun (all resources) can also distribute MySQL through its channel and OEM partnerships and create various bundles. The overarching goal is to give MySQL more "commercial appeal" and boost adoption of open source software in the enterprise.

In a statement, Schwartz said the MySQL purchase puts his company at "the center of the global Web economy" since the open source database provider is entrenched at Web giants. MySQL is included in that platform that includes Linux, Apache and PHP/Perl commonly known as LAMP.

Schwartz followed up on his blog:

We're putting a billion dollars behind the M in LAMP. If you're an industry insider, you'll know what that means - we're acquiring MySQL AB, the company behind MySQL, the world's most popular open source database.

You'll recall I wrote about a customer event a few weeks ago, at which some of the world's most important web companies talked to us about their technology challenges. Simultaneously, we gathered together some of the largest IT shops and their CIO's, and spent the same two days (in adjoining rooms) listening to their views and directions.

Both sets of customers confirmed what we've known for years - that MySQL is by far the most popular platform on which modern developers are creating network services.

One big question is what Sun does next to build out its stack of open source software and other applications covering middleware, storage and virtualization. Sun's software lineup now includes Java, MySQL, OpenSolaris and GlassFish.

The company can now pair MySQL with Solaris and could fill out its roster with other targeted acquisitions. A large scale merger with a company like Red Hat is probably a non-starter though given Sun's infatuation with Solaris.

Sun plans to integrate MySQL into its software, sales and service groups and MySQL CEO Marten Mickos will stay after the acquisition.

Mickos on the conference call added that the deal makes "wonderful sense" because the combined company can offer a diversified software stack to multiple platforms.

In a statement Mickos said, "Sun's culture and business model complements MySQL's own by sharing the same ideals that we have had since our foundation -- software freedom, online innovation and community and partner participation."

Marten Mickos, MySQL CEO, joins the Sun open source soul train and managed a healthy exit for his company's founders and investors, which includes Benchmark Capital, Institutional Venture Partners, Index Ventures, Holtron Ventures, Intel Capital, Presidio STX, Red Hat, Scope Capital and various angels.

Other questions about the deal remain. Among them:

How will the MySQL community handle being part of Sun? Sun is a member of the open source community, but has been controversial and viewed as late to the game on taking Java to the masses. Sun has contributed a lot, but folks don't like change. Sun plans to optimize and bundle MySQL with its software and hardware, but if this is viewed as a sales pitch there will be issues. One talkbacker in this post is already skeptical. I'm curious to see the community reaction here.

Schwartz wrote:

MySQL is already the performance leader on a variety of benchmarks - we'll make performance leadership the default for every application we can find (and on every vendor's hardware platforms, not just Sun's - and on Linux, Solaris, Windows, all). For the technically oriented, Falcon will absolutely sing on Niagara... talk about a match made in heaven.

Can Sun bridge the enterprise-startup divide with MySQL? Schwartz on his blog noted the following:

CTO's at startups and web companies disallow the usage of products that aren't free and open source. They need and want access to source code to enable optimization and rapid problem resolution (although they're happy to pay for support if they see value). Alternatively, more traditional CIO's disallow the usage of products that aren't backed by commercial support relationships - they're more comfortable relying on vendors like Sun to manage global, mission critical infrastructure.

That's an excellent point and presents a conundrum. If Sun makes MySQL more enterprise acceptable does that diminish its mojo with startups? Does it matter?

Mickos said the enterprise-startup bridge is a "big opportunity" and Sun can capitalize on because the MySQL roadmap will be sped up as the two companies focus on scale, performance and integration. "We stand out from most databases," explained Mickos. "MySQL was developed for online world. Our relevance grows in the enterprise as they shift to Web-based architectures."

Separately, Sun said it expects to report fiscal second quarter revenue of $3.6 billion and earnings of 28 cents to 32 cents a share. Wall Street is expecting earnings of 29 cents a share on sales of $3.58 billion.

Dan Farber contributed to this post.