Who would have thought that the cloud computing revolution would have turned Oracle’s Larry Ellison into a CEO who’s hunting for chip acquisitions, as he himself said yesterday? However, Ellison is no dummy, and after Oracle World and the new Exalogic gear the company unveiled, it’s clear that Oracle (s orcl) is attempting to become the Apple (s aapl) of the enterprise sector. It’s building custom boxes, software and whatever else to deliver a user experience for the cloud that is simple to run and deploy, but proprietary as heck. No wonder the majority of the enterprise software geeks are slamming it.
I was surprised that Oracle actually released the latest version of the Sparc chip Sun was touting a while back, but it appears I shouldn’t have been. Since Oracle is pursuing this tightly integrated strategy, such differentiation at the silicon level makes sense. Look at Apple’s purchase of PA Semi and Intrinsity to goose its own hardware as it pushed the envelope battery life and performance for mobile computing. Oracle’s efforts to reduce energy consumption and deliver scalable performance for cloud computing may require the same commitment to custom chips, and Sun’s Sparc line may not be doing the job. So Ellison’s comments yesterday open the door for a variety of possibilities. He said:
“Our focus is to build our (intellectual property) portfolio. … You could see us buying chip companies,” Ellison said. “Silicon is very important, software IP is very important.”
As always happens when execs talk about buying chip companies, the stock of ARM (s armh), the British licensing company behind the low-power chips in cell phones and embedded products, saw its stock shoot up. I doubt Ellison is going to buy ARM, even though ARM has an $8.68 billion market cap and Oracle has $23.64 billion in cash and a hankering for controlling IP. ARM would be a tough sell simply because so many huge companies are dependent on its technology. It has over 600 licensees — some of which are huge like Apple (s aapl), Samsung and Microsoft (s msft) — putting its chips into servers, mobile phones and set-top boxes. It’s hard to imagine a company like Oracle buying ARM; it simply wouldn’t make sense for Oracle to keep the R&D dollars flowing and support a huge licensing business merely to gain a competitive advantage in the enterprise data center. Plus, the outrage from ARM licensees could halt a deal. A more likely bet would be to look to the ARM-licensees for buyout targets. Perhaps Smooth-Stone, which is building a low-power server using ARM-based chips and its own silicon to control the networking, or one of the high performance computing startups that have built a specialty chip for performance could work.
As for the other large chip players like Marvell (s mrvl), Broadcom (s brcm) or AMD (s amd), I’m not convinced those make any more sense. Yes, AMD’s in the toilet, but Oracle doesn’t need to buy AMD to get an x86 chip. If one wants to build some kind of super server, I suppose AMD’s planned GPU-CPU Fusion hybrid might have merit, but again, AMD’s still a big purchase for an x86-based chip. As for Broadcom, Marvell and the rest of the big chip vendors, it’s hard to see Oracle wanting a wireless radio play when it is building enterprise boxes. So my hunch is smaller HPC vendors, perhaps buying the computing line from a lesser-known company or even IBM’s Power PC line, or finding a smaller ARM licensee that has an interesting server technology plan.
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