Oracle Tells Sad Truths

Pri­mar­ily this is a defen­sive (mean­ing not very cre­ative) move by Ora­cle.  IBM would have been a mea­sur­ably stronger com­peti­tor for Ora­cle with Java and MySQL added to their for­mi­da­ble soft­ware stack.  So the real value for Ora­cle is more in IBM not hav­ing Sun rather than direct ben­e­fits for Ora­cle.  All their state­ments to the con­trary are only cor­po­rate pos­tur­ing.  That fact is not going to be good news for Sun employ­ees who can expect Ora­cle to make the Sun acqui­si­tion highly prof­itable by dra­mat­i­cally elim­i­nat­ing costs, shut­ting down ini­tia­tives and exit­ing businesses.

We’re aware of the fact that many com­men­ta­tors are tak­ing Ora­cle com­ments at face value that they are going to cre­ate a real full ser­vice counter to IBM in the indus­try by pre­serv­ing all the major ele­ments of the com­pany and adding more global ser­vices.   We see no chance that this will actu­ally hap­pen.  Fail­ing that the spec­u­la­tion is that HP will act in con­cert with Ora­cle to present a uni­fied solu­tion to large cus­tomers but we see the Ora­cle move as being more threat­en­ing to HP and that they will be extremely aggres­sive at under­min­ing Oracle’s efforts.

Ora­cle may do some con­struc­tive things with the Java assets which hold great sway in the enter­prise and are tied with Microsoft .NET in most cor­po­rate devel­op­ment envi­ron­ments.  How­ever Ora­cle doesn’t exactly inspire con­fi­dence in the hearts and minds of end users.  That they will be around is a cer­tainty but whether they will put the com­mu­nity and cus­tomers first is more questionable.

MySQL would seem to be doomed in the hands of a pro­pri­etary monop­o­list like Ora­cle.  How­ever it may not be quite the case.  After all there are open source licenses in force and a com­mu­nity in place.  This will help to keep MySQL viable in the short and medium term.  What steps Ora­cle takes will influ­ence the deci­sions of the key devel­op­ers and users.  The rhetoric won’t be a tell at all.

From an end-user per­spec­tive we can be fairly sure this will force some strate­gic rethink­ing.   Java and MySQL in the hands of Sun meant they were safe and sta­ble and owned by a com­pany that wasn’t much of a threat.  Now it’s a bit dif­fer­ent. Ora­cle is seen in the same light as Microsoft.  Pro­vid­ing a valu­able set of tech­nolo­gies and ser­vices but also charg­ing heav­ily for it thanks to their pro­pri­etary IP and very fat oper­at­ing profit margins.

Impli­ca­tions by company:

Microsoft (MSFT) — Prob­a­bly good news.  IBM would have been more cus­tomer and open source friendly than Ora­cle is likely to be.  It makes Java and MySQL along with frame­works based on them more sim­i­lar to the .NET and SQL Server choice. Ora­cle may try and take OpenOf­fice into bat­tle but we’ve seen sim­i­lar efforts from Ora­cle for the past 10 years or so and they have never been able to “get” pro­duc­tiv­ity applications.

IBM (IBM) — Looks like a bum­bling loss from where we sit.  May force them to take a more seri­ous look at Red Hat (RHT) which is doing very well in the enter­prise.  We don’t know Red Hat man­age­ment well enough to say if they are up to the task but they are sit­ting on a pow­er­ful indus­try oppor­tu­nity right now.  IBM is big enough that it won’t effect the com­pany but we expect the IBM Soft­ware Group is scram­bling this week.

Cisco (CSCO) & HP (HPQ) — Many Sun cus­tomers are going to have to look at alter­na­tives.  HP is the mar­ket leader in servers and this will bump up the pace of their share gains vis a vis Sun.  Cisco will have work to do in order to break into the server mar­ket but this event will spur some per­cent­age of Sun server cus­tomers to start a fresh eval­u­a­tion which will help Cisco get a foot in the door at some large accounts.

EMC (EMC) & VMware (VMW) — EMC is likely to pick up some share in the stor­age mar­ket and VMware gains some strate­gic value as in infra­struc­ture layer that can help improve the flu­id­ity of server infra­struc­ture and enable a con­tain­ment and migra­tion from Sun servers in places where that will be happening.

Prob­a­bly also good for: Salesforce.com (CRM), Sybase (SY), Google (GOOG) and Ama­zon (AMZN).

Prob­a­bly also bad for: SAP (SAP) who is increas­ingly irrel­e­vant with soft­ware that isn’t aging well.

We have pub­lished a num­ber of full reports that are use­ful in look­ing at this sec­tor includ­ing The IBM Soft­ware Group ($), Microsoft ($) , HP Soft­ware ($), Google ($) and Open Source ($).  (They are also avail­able to clients in the research library after login.)

[Dis­clo­sure: At the time of this writ­ing Research 2.0 does not have an invest­ment posi­tion in any of the stocks men­tioned in this post.]

Tagged as: IBM, Oracle, Sun