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Summary:

Oracle’s decision to buy Sun Microsystems for $7.4 billion is not only going to shake up the database business — it’s likely to energize the Java community, too. And of course, the deal puts the insurgent MySQL database in the hands of incumbent Oracle. Whatever the long-term implications, in the short term expect massive layoffs as Oracle tries to squeeze profits out of Sun.

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Oracle Campus in San Francisco Bay Area, Calif. Photo via Flickr by Steve Jurvetson

Updated: Less than a month after it walked away from a $7 billion deal with IBM, Sun Microsystems says that it has entered into a definitive merger agreement with database and enterprise software giant Oracle. Oracle will acquire Sun common stock for $9.50 per share in cash. The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt. It’s been approved by Sun’s board of directors.

Well if not IBM, someone was going to buy Sun, for the company was being actively shopped around to buyers. I thought Cisco should buy Sun, and so did 66 percent of 1,120 of our readers who took part in an online poll. At this price, it looks like Oracle found itself yet another bargain and in one fell swoop became a worthy competitor to IBM. It allows Oracle to become a player in the cloud computing business. More importantly, the company ends up acquiring MySQL, the upstart database that has been viewed as Oracle’s Achilles’ heel. In one fell swoop, it has taken out its No. 1 competitor. Oracle says that this acquisition is to be accretive to its earnings by at least 15 cents on a non-GAAP basis in the first full year after closing.The acquired business will contribute over $1.5 billion to Oracle’s non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. “This would make the Sun acquisition more profitable in per-share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined,” said Oracle President Safra Catz in a statement.

“Oracle will be the only company that can engineer an integrated system -– applications to disk -– where all the pieces fit and work together so customers do not have to do it themselves,” said Oracle CEO Larry Ellison. Loose translation: IBM, you’d better watch out. Oracle now has the same kind of hardware and software capabilities, including providing large storage and computing clusters, that make IBM a fearsome player in the corporate arena.

Oracle touts the advantages of owning Java and Solaris in this press release, but mentions nothing of the real jewel in the crown: MySQL. The $1 billion acquisition has been a point of contention for Sun’s detractors, but the fact is that despite most of the MySQL team having quit, the little upstart database keeps on growing and growing. Oracle also gets some virtualization technologies with the Sun buy. Still, if you’re an open source enthusiast, you have to worry about this deal’s impact on open-source projects such as Open Office and MySQL. Oracle is known to squeeze its acquisitions for every single penny.

Update with views on MySQL: I am surprised by the lack of any mention of open source or MySQL, two of current CEO Jonathan Schwartz’s biggest corporate mantras, in the press release. MySQL is clearly a big prize for Oracle. Oracle’s products find no room in most of the new web companies — most preferring either MySQL or other open-source offerings. On the high end as well, Oracle has been competing with the MySQL Cluster offering. In addition, several startups have started to develop a new kind of data-store ecosystem based on MySQL, which is competitive with Oracle’s database offerings. In short, Oracle has taken out its No. 1 threat by buying Sun.

The deal is very likely going to result in exits from the MySQL team and cause some sort of a disruption. If I were Oracle, I would be paying a lot more attention to the MySQL team. Why? Because they have developers — many of them focused on developing things for the cloud and web services. These developers are the best way to keep Microsoft at bay as well.

Update: Since publishing the original post, I’ve been in touch with some of the folks who are especially well-versed in the ways of Oracle and Sun. Here are some highlights and questions from my conversations:

* The deal could mean trouble for Sybase, which has a lot of customers on Solaris.
* It could prove challenging for non-database users of Solaris, for it’s not clear how Oracle will treat Solaris.
* It’s good news for Java, as two major corporate giants will be supporting it and will be forced to play nice with each other.
* Oracle will keep MySQL going mostly because it can act as a funnel for further business opportunities.

Miko Matsumura, VP and deputy CTO at Software AG, has a contrarian take on the merger. He predicts it will be a disaster, with thousands of layoffs. He is right about the layoffs; President Safra Catz was pretty explicit in saying that Sun’s hardware business will be profitable, where one could expect the research team to be slashed along with other products.

On the Oracle side of things, one does wonder how will they digest this deal, which is definitely more complex than, say, PeopleSoft or BEA Systems. As Matsumura said to me in an email, “The boldness of this play suggests to me that Larry and Chuck Phillips believe that it’s going to get worse before it gets better. This is a cost-synergy play where Oracle burns most of the cost out of Sun and scoops up some of the dwindling revenue in the form of margins.”

  1. I don’t know the future of MySQL, OpenOffice, but there is bright future for Java. Good to watch enterprise cloud war.

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    1. Absolutely. I think it would be interesting to see how it shakes out. Java (oracle) vs Java (IBM) …. let the battle begin in earnest.

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  2. The MySQL angle intrigues me.
    I can’t see the MySQL ‘close enough’ attitude to data going down well with Oracle developers – or their PR machine.

    At a wild guess, Oracle will offer to create ‘not for profit foundation’ for MySQL as a sop to the regulators.

    This is going to be an interesting test of how effective an open source license is at protecting a body of code from an owner who – to date at least – has shown no opensource instincts.

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    1. I can imagine them putting an Oracle backend on MySQL and trying to move the MySQL companies to their “accelerator”. MySQL has always been more about “free as in beer”, than “free as in freedom”.

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  3. end of an era.

    but watch out for them layoffs. blood on 101 from whipple to marsh. this will be ugly.

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    1. oh that is graphic….and yes the layoffs are going to be brutal. On the upside… some serious Sun talent will hit the market which is always a good thing for they do are great engineers and can create great stuff.

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      1. Hmmm…are you sure there’s still serious talent left at Sun?

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  4. From an open source perspective IBM would have been better. But I am now on the side that open source as a business does not make sense after a certain scale. It is great as an enabler , not a business model in itself

    http://blog.gandalf-lab.com/2009/03/death-of-billion-dollar-opensource.html

    My net experience with sun as an investor: Jonathan failed and I lost $20K personally

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  5. I think Oracle will nurture MySQL – it will give them entrance into the cloud and a whole new market that they can upsell to over time. More importantly it will allow Oracle to finally kill of MS SQL.

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    1. Charan – nice sentiment but a little naive. Oracle does not want MySQL to be around at all – because as the author put it nicely. There are very few Internet startups who do anything with Oracle. Oracle’s business model is old – their vision is old, and old companies love them..

      It’s a sad day for MySQL and the rest of us..

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      1. Apple and amazon and ebay are big users of oracle. All of them have large web presences. In fact most of the stuff you have bought online went through an oracle database. That is no mean feat

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  6. Whether one likes it or not, this is an industry-changing development. One big take-away for me is that one of the last tech titans is finally on-board with cloud computing!

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  7. Oracle also adds an OS to its stack. This is going to be interesting!

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  8. Perhaps Schwartz wasn’t so wrong to have acquired MySQL, even for $1b… seems like that made Sun a very attractive target for Oracle, even if their SPARC business was dropping from the financial crisis.

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  9. Giovanni Glass Monday, April 20, 2009

    MySQL is GPL software. It’s free as in speech. So long as people use it and believe in its worth, you can’t kill it. Oracle can position MySQL any way it wants against Oracle DB, but if they even think of limiting it, slowing development, bad mouthing it, developers will fork it and Oracle will be hurting the trust of the open source community.

    Just because Oracle “has taken out its No. 1 threat” doesn’t mean it will affect open source projects based on MySQL. Oracle is out to make money and will follow it wherever it takes them. MySQL will continue to grow and beat Oracle by its own merits. This takeover is nothing but a glittery sideshow – nothing to worry about for open source.

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    1. If you believe spare time hackers can provide the same level of support as MySQL:s 300+ hired staff can do, you are insane. Oracle now owns the MySQL code base, and they pretty much decides who will do what with it. Other players may fork the source code, but since Oracle holds most of the intellectual proeprty of it, it is damned hard to earn an income based on it. It would have been a completely different story if MySQL was distributed under the BSD license, for example.

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      1. You are completely wrong. Oracle owns the MySQL logos and other identifying stuff like that. They also own the MySql web site. That is about all that they own. MySql has all ready been forked at least a couple of times.

        After the sleazy way Oracle started reselling their version of RedHat with very little give back, my guess is Oracle will not be making any friends in the open source world with this acquisition.

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    2. Charu Kanzehr Tuesday, April 21, 2009

      Its not easy to fork a database like MySQL. Since database software development is one of the costliest software development beyond a certain point which MySQL has already crossed. Maintaining the pace of MySQL development as a public domain available under GPL is now beyond the capacity of free software community. Ultimately Oracle will make it a kitten database and position it like an entry point for Oracle Database. MySQL will be used as a pawn to sell Oracle Database-the Queen of the databases.

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    3. No doubt MySQL will continue to grow but it will first need to “start” beating Oracle before “continuing” to beat it on it’s own merits. And that won’t happen for at least 5-10 years out – if ever.

      I’m a database professional who dives into some of the worlds most complex database environments constantly and I see plenty of the periphery. I pretty much never see MySQL in anything mission critical and where it comes closest it acts as a read-only repository loaded by hodgepodge batch solutions from the OLTP databases produced by top 3 well known DB vendors.

      As it stands, Oracle’s the defacto standard, DB2 continues it’s downward slide and SQL Server continues to consistently scale better. And Teradata seems to keep popping up in the warehouses. So we’ve got a Coke, Pepsi, Mountain Dew and Dr. Pepper. MySQL can only hope to be a Fanta unless something big happens to it to help it along. And that something big could very well be this Oracle acquisition.

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  10. I hope Oracle handles MySQL diligently and does not change the free offerings.

    Oracle might rebrand MySQL as OraSQL .. lol

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