Now, it seems Oracle remains no more committed to Sun’s hardware business than it was before the acquisition news broke – when we originally reported Oracle only wanted Sun for its software.
A source close to Oracle has told The Reg that Oracle has continued to shop Sun’s hardware business around to potential buyers after the official announcement of its intention to buy the whole of Sun – and after it moved to re-assure Sun employees of its love for their hardware.
The Register’s source qualified the price Oracle was asking for Sun’s hardware business as “unrealistic.” Oracle declined to comment for this article.
Oracle and Sun announced the planned $5.6bn acquisition on April 20, and two days later Oracle president Charles Phillips and chief corporate architect Edward Screven played up Oracle’s experience in hardware and interest in continuing to develop and sell Sun’s processor lines.
“We needed to be comfortable with the fact these were hardware platforms, systems, that we were going to keep selling and developing…we are very comfortable,” Screven said during a Sun-employee town-hall meeting.
It is unclear whether Oracle is actively trying to sell Sun’s hardware business after lowering the asking price. It may have given up.
Trying to sell off the hardware component. We alluded that this might be a happening. That’s why we thought the IBM-HP consortium was a better fit. HP has a reasonable midrange business so they could correctly absorb the Sun Solaris component without too much problem. IBM already a big player in FOSS would continue that tradition with the software side.
It gets rather disturbing to see corporations make all sorts of announcements about ‘fit’ only to be lying through their teeth. That is how they view their customer base as well.
OK, it looks like he’s latching onto the latest greatest thing – telling the JavaOne conference that now Oracle is swallowing Sun, he could well imagine the market welcoming Java-powered netbooks.
In fact, he ventured, “I don’t see why some of those devices shouldn’t come from Sun. Here will be computers that are based on Java and JavaFX and devices based on Java and JavaFX, not only from Google but also from Sun.”
But this will all bring tears of nostalgia to the eyes of anyone who remembers the ground-breaking launch of the network computer, back in 1995.
Back then, when it looked like Wintel was going to dominate the world forever, Ellison and his plucky sidekicks – Scott McNealy and some guy from IBM – took to the stage at Comdex to propose a line of cheap, diskless PCs that would take full advantage of the network or even something called the internet.
As a concept the idea of the netcomputer that is pretty much nothing more than a high intelligence dumb tube has a lot going for it. Fact the numbers in reducing headcount on the admin backend is favorable. But there a lot of caveats attached to that effort. –
If not you have to add all those costs to the mix in any assessment of a switch. Once the ROI calculations are in you will find that the savings are thin indeed. Not Sun’s issue, but the reality is transitions costs are high. Which in these uncertain times if you don’t have a ROI winner then management passes.
So now Larry wants you to buy into this concept as part of the current netbook craze. Technically I can see some advantages here on a portable device like a netbook. If one is very security conscious, think NYSE, then presenting the desktop in that manner makes imminent sense. There is nothing to steal as it all resides on the server. But as a general mode of operation? Pass. You are adding recurring costs on top of the current management of the portable device fleet.
Pure marketing, attempting to gain presence on top of a successful trend.
Oracle said the boards of both the firms had given the transaction the thumbs up. It’s expected to complete this summer and is subject to shareholder approval as well as the normal regulatory requirements.
“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Oracle CEO Larry Ellison.
“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. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”
“We expect this acquisition to be accretive to Oracle’s earnings by at least 15 cents on a non-GAAP basis in the first full year after closing,” said Oracle President Safra Catz, in a statement today.
“We estimate that the acquired business will contribute over $1.5bn to Oracle’s non-GAAP operating profit in the first year, increasing to over $2bn in the second year,” Catz said.
First. What an odd combination. Oracle is not known for being in the hardware business. They lack the expertise to manage that side of the merger. Using Sun continuing mgt in that role is to keep the same drain as before. Besides what happened to HP? Originally the Sun buy was an Oracle-HP consortium that was going to do this. In any regard the hardware side is a write off. The Intel multicore juggernaut will continue to cream Sun hardware up the middle.
Second. Whither Java? Yes it is the Cobol of the 21st century. Fact is it is still being used and expanded. IBM would have been a better fit in my view. Oracle I am afraid will privatize the language and make people pay thru the nose in royalties. That happens you can play taps on Java’s grave. The market in language design is in FOSS. If you doubt it go do a survey of the proprietary languages that have been developed in the last 10 years. I’ll save you the trouble — .Net, Silverlight, Adobe fx/Flex.
Third. What of the Open Source Sun Products? Does the Open Office – Sun Office relationship continue? What of OpenSolaris? Or Glassfish? The issue with Open Office is probably the near term one. Practically every main line distro out there utilizes OOfice as their office productivity package. Were that tool to stall in development there would be some serious concerns.
Overall I just saw IBM as a better fit. Oracle in my mind has always been a corporate pirate and the number of suits against them tends to prove it. Nor do I see how some of the pieces pay off. Today Oracle paid a little over market value. The problem is, if you applied technology discounting rules much of the tech in Sun will only be worth 60-70% of what it is worth today. So Oracle probably overpaid. In this economic environment that means being overextended and we know where that goes.
People familiar with the situation said Sun’s board rejected a formal acquisition offer by IBM on Saturday, sending a notice terminating Sun’s agreement to negotiate exclusively with IBM. IBM on Sunday withdrew its offer to buy Sun, said a person informed about the situation. Another person familiar with the negotiations suggested the situation was “fluid” and that advisers to the parties were still in touch by telephone.
The news sent Sun shares down $1.90, or 22%, to $6.59 in Monday trading.
Sun’s board is split over whether to do the deal, with a faction led by Sun’s chairman and co-founder, Scott McNealy, opposing the transaction and a group led by Chief Executive Jonathan Schwartz in favor, said two people familiar with the talks. While the price of IBM’s offer remained unclear — some placed it at $9.10 a share, others at $9.40 — some people familiar with the talks say price wasn’t the biggest issue.
Sun argued that the offer gave IBM too much “optionality,” or leeway to walk away from the deal, according to one person familiar with the talks. IBM believed that under the proposed framework, it would be fully committing to a deal.
I have rarely found a what amounts to a merger of equals. Have seen that up close and personal and it is far from that. The presumption that Sun wishes to dictate an assumption of guarantees as part of the deal is laughable at best. Companies aren’t guaranteed to be in existence tomorrow let alone that a merger deal will not fail. Which appears to be bad planning on Sun’s part. Had they wanted those kind of provisions they should have built themselves a series of poison pills years ago as a fall back.
As it is I am thinking there are some shareholders that are rather ticked about the current situation. After all the stock has lost 22% of its value in just 48hrs.
BOSTON — IBM Corp. withdrew its offer to buy Sun Microsystems Inc. for about $7 billion this weekend, clouding the prospects for a deal that would have shaken up the computing industry, The Associated Press has learned.
Talks were in their final stages in recent days, but IBM took its offer off the table after Sun terminated IBM’s status as its exclusive negotiating partner, according to two people familiar with the situation, who spoke on condition of anonymity because they were not authorized to disclose the negotiations.
One of these people said the two sides were still meeting Sunday.
Typical theatre at this point. Considering that the HP-Oracle is just a little over half of IBM’s tender, not much worry so far. Especially since the stock price is at the $8.50/share range. Way over HP-O’s tender.
HP and Oracle are also tendering an offer for Sun. We reported on IBM’s offer here. The deal would have Oracle taking the Software assets and HP taking the manafacturing, firmware and OS components. The interesting piece is this offer appears to be a defensive postured affair and undervalued compared to IBM’s tender –
A potential deal between the three is understood to have been blocked by IBM, in the middle of talks to buy the whole of Sun for a reported $6.5bn.
Oracle, HP, and Sun declined to comment on what they called rumors, while IBM was unavailable for comment at the time of going to press.
A source, who didn’t want to be identified, told The Reg that Oracle and HP had gone in to meet Sun to discuss the possible deal.
It’s already been reported that Sun had been shopping itself around Silicon Valley, with HP named as a potential buyer.
This, though, is the first indication that HP had teamed with Larry Ellison’s M&A beast Oracle – which has bought 50 companies in four years – to take only what they wanted from Sun. At $2bn, this would have been one of Oracle’s large purchases, slotting behind PeopleSoft and BEA Systems.
HP, Oracle know that to permit the IBM deal to go through would make it rough on them on multiple liines of business. But are they any better fit than say IBM? Probably not and here is why.
Consider HP, why buy the Sun Sparc line? If you look at their product mix, HP has been better at keeping the products separated in the market than IBM. So to buy Sun hardware seems counter intuitive to their overall product plans. The counter argument is that like IBM, HP assumes it is cheaper to buy Sun market than compete against it. If both companies would intended to keep Sun manufacturing going then the key is their view on the value of the longtail.
Looking at Oracle I have even bigger concerns. To Sun’s credit they were trying to move to the Open Source model on the software side. That is something that Oracle practices, but I would not say it is with relish. IBM on the other hand has literally had to breath Open Source. If they had not done so in the 1990′s good chance they might not be here today. It’s part of their culture. The saving grace with Oracle doing so is that there is not much overlap with what they provide and Sun provides. Most projects would be able to continue without the redundancy review factor in play like with IBM.
The bottom line of course is will the shareholders be willing to settle for less than IBM is offering. When it’s cash, usually not.