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.

Linky.

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. –

• Is your staff already trained in the use of Sun VDI and Solaris on the backend?
• Are you prepared or considering the hardware upgrade on the client level?
• Is your layer 1 network current? If not add that to the costs.

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.

Linky.

In what has to be a surprise, Oracle has made a tender offer for Sun at $9.5/share for a $7.4Bn acquisition cost. This will be most interesting to watch –

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.

Thoughts?

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.

More here.

Sun shares are as of this posting hovering at $6.31 a share. That is down from the $8.50 close on Friday. Rumors are the talks are in break down over issues related to ‘guarantees’ –

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.

Linky

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.

Linky

IBM has opened acquisition talks with Sun Microsystems, raising the prospect of a massive consolidation of the software, server and storage markets.

According to the Wall Street Journal IBM has mooted a price of $6.5bn. Sun is currently capitalised at $3.7bn ($4.97/share), but its share price has persistently fallen since the heady days of the dot com boom and has under-performed that of its computer systems competitors over the last few years, making it a much less expensive purchase now that it would have been three or four years ago. Legions of long-term Sun investors who have seen the value of their Sun holdings decline drastically will breathe a huge sigh of relief as they see the potential to make some money at least.

Any deal would likely bring very close scrutiny from regulatory authorities, given both firm’s roles in the server, storage and systems software markets.

With that will signal the end of a nearly 28 year Sun history. Will it pass regulatory muster? In a different time it would not. Today? It might. Sun would probably have to try and find buyers for some pieces to get the past the regulators. Probably the same pieces that IBM would not want anyway.

What’s in it for IBM? Market share. At Sun’s current stock price it is cheaper to buy their market base than it is to develop and compete against them. With the acquisition IBM could pull some tricks –

• Get the Solaris OS to work on Z class MF either natively or as a guest OS.
• Take the Intel class OS’s Open Source. Then unleash them against HP and Dell.
• Completing the first two bullets, either phase out or sell off the manufacturing arm to a OED in Taiwan or Singapore.
• Merge or close down software efforts where there is overlap.
• Fire a bunch of VP’s.
• Eliminate Sun marketing.

For Sun’s customers? Well confusion of course. But it will probably not be that bad in the short term. IBM will either directly or through outsourcers make sure they meet contractual warranty obligations. Systems developed today are much less dependent on the hardware layer than they were just 10 years ago. That being said there will probably be a minor rush to either acquire as backups or displace older Sun devices. Any good size IT installation that has used Sun in the past probably have a bevy of old Sun Sparc stations sitting in closests doing a couple of one trick pony services that nobody felt worth porting. A mini version of the y2K thing.

Long term there is probably no effects in the market. Sun was being squeezed at the top of their range by the Z class devices as they improved their price points. At the bottom end the Intel multicore processors were doing the same thing to Sun on the low end. Sun’s share of the midrange was shrinking. (As was HP’s and IBM’s by the way.) Given the current trajectories, Intel will own all the midrange in probably 10 years.

Which poses the question — does IBM’s buy hasten the process and force HP and IBM to rethink their midrange offerings? For if they do a write down on Sun’s manufacturing because they know Intel’s dominance is the future why not do it once? That is, also do a write off of the old AS/400 and the newer Power series line using non-Intel chips. Two write downs in one. The advantage of course is that the market will not react negatively to a write down of Sun assets as it will be expected. So doing so with the other assets will be favorable. It provides the boardroom cover.

Linky.

Don’t want to be a Grinch, but the difference between an adult and other is the ability to face facts. Fact is the global economy is in the dump right now and right now we don’t see a bottom.

So lets chalk up a few items here and see where the trends are –

Sun

Goldman Sacks has downgraded Sun to the sell list. Anyone who has been a consistent reader of this blog would know we find this as no surprise. Sun’s niche, the middle to upper-middle of the midrange server platforms are under seige by intel based multicore systems. –

The stock and probably the collective psyche of server and operating system maker Sun Microsystems is taking some hits today as an IT watcher at Goldman Sachs put the company on its sell list.

Link.

Google

Google has dumped an unspecified number of temp workers. Best number is 4000. What is more troubling is that Google felt it necessary to sneak the filing into the SEC in paper form only to avoid any detection by web bot systems. –

In October Google co-founder Sergey Brin told the San Jose Mercury News that the web kingpin had around 10,000 contractors on its books. However, a Google spokeswoman told AP yesterday that hacks shouldn’t conclude that the difference between the two figures represented how many people had been culled under the plans.

She declined to specify how many contractors the company had purged.

Link.

Lenovo

The AxeMan took 2500 off the rolls of Lenovo. The losses were part of a resizing due to the downturn. The interesting piece to note is that IBM is still selling off its stake in Levono piece by piece. The best move ever made by IBM was the fact that a transfered a boatload of debt in the deal. Could we go so far as to say a corporate subprime move? –

In an effort to offset Lenovo’s sales decline, the firm plans to cut-and-shut its workforce by “consolidating” its China and Asia Pacific outfits into a single Asia Pacific and Russia (APR) biz unit.

“Although the integration of the IBM PC business for the past three years was a success, our last quarter’s performance did not meet our expectations,” Chairman Yang Yuanqing said in a statement.

Lenovo acquired IBM’s struggling PC unit for $1.25bn – as well as an assumption of debt – in 2005.

Link.

Dell

Dell shuts down its plant in Limerick Ireland and lays off the entire plant staff - 1900 folks. Dell has sent signals it wanted to get out of the physical construction end of the PC market. This is one way to do it. —

Dell is closing its Limerick manufacturing facility, with the assembly plant’s functions due to be transferred to a Polish plant in Lodz.

The Limerick plant assembles notebooks, desktops and servers for all of Dell’s Europe, Middle East and Africa customers. About 1,900 jobs will be cut, starting in April and completed by January, 2010. Sacked employees will receive a severance package and some assistance in finding a new job.

However, Dell’s Limerick operation will carry on coordinating EMEA manufacturing, logistics and supply chain activities for product development, engineering, procurement and logistics. Direct assembly plant jobs go to Poland but supervisory management jobs stay in Limerick.

Link

OLPC

The little train that never quite could. Designed with good intentions the hardware and software were to spec. But when it came to the implementation the lack of business acumen was lacking. Nonprofit is a tough racket even if it does feel good. as a consequence OLPC is laying off half of its personnel –

Blaming the credit crisis, chairman and founder Nicholas Negroponte thanked those leaving for their contribution to “a noble cause”.

The restructure leaves OLPC with 32 staff. It will focus on the development of its next machine XO-2 and on shipping a million XO laptops - the group has so far distributed 500,000 machines. Latin America will be spun off into a separate division while the Middle East, Afghanistan and Northwestern Pakistan “will become a major focus”.

Link

Satyam

Update: This is the one to watch folks! Satyam employs 50k+ worldwide. They have forces working on projects large and small. If this company goes under which is likely it will most likely cause a major rethink in the IT industry as to business practices. The fall of Satyam will expose many US firms to liability for nondelivery of services. Quite a few lawyers are going to get rich. As it is right now, the CEO of Satyam has not been seen since his exposure letter of yesterday. Its as bad as a Perry Mason episode –

Satyam’s founder and chairman B Ramalinga Raju has disappeared, a day after he admitted to years of false accounting at the outsourcing giant.

Raju’s lawyer insisted his client remained in Hyderabad despite conflicting reports that he had fled to Dubai or Texas. He has not been seen in public since yesterday’s extraordinary letter was made public and the Indian media have failed to find him. Several groups are calling for his immediate arrest.

In his letter yesterday chairman Raju admitted to years of false accounting and boosting profits by a factor of ten.

Link

Recommendation is to keep a cool head. Tech is going to take it in the shorts for a while. But all it means is a delay. What would have been developed and deployed this year will wait till 2011 when the economy improves. But if you are on the R&D side of things batten down the hatches it will be the toughest wave of all.

The speculation about a Sun / Amazon partnership is no more. Sun has announced that it will make Open Solaris available on Amazon’s EC2 cloud computing service.

• Sun’s OpenSolaris OS will be available on the Amazon Elastic Compute Cloud (Amazon EC2) customers for free. It is in beta for now.
• Sun will provide premium technical support for MySQL database running on Linux and Amazon EC2.

These developments are meant to address the needs and complaints of the developer community. OpenSolaris, which comes with tools such as ZFS and Dynamic Tracing (D-Trace), will be offered for free, in contrast to some Linux offerings that cost money. For instance, if you sign up for EC2 and pick RedHat, it costs $19. ZFS allows instant rollback and continual check-summing capabilities, something developers have found lacking in the EC2 platform. This OpenSolaris on Amazon EC2 beta is currently available by invitation only. Some software vendors, including GigaSpaces, Rightscale, Thoughtworks and Zmanda, are already offering their solutions via Amazon Machine.(GigaOm)

If well executed, it could be huge for Sun by focusing more development on Solaris. Amazon wins either way as existing code for Solaris will now more easily take up residence in the cloud.

To be fair Sun’s Scott McNealy has been talking up the cloud computing concept since the early days of the internet. Unfortunately, Sun never really did much to convert the lofty idea into a service for the masses like Amazon has. Recently Sun CEO Jonathan Schwartz hinted that a deal between Sun and Amazon having to do with cloud computing services is on the horizon. Perhaps by teaming with Amazon, Sun can finally realize McNealy’s dream.

When I asked him about Sun — and cloud computing especially — in light of the recent trend in which startups now have more of an affinity with Amazon Web Services than Sun, Schwartz replied with a question: “Do you think it would make sense for us to partner with Amazon to offer free info on the cloud?” I guess, I said. “Then you’ll be paying attention to the announcement we make tomorrow with what we’ll be doing with Amazon.”

He pointed out that Amazon has done a great job of evangelizing the whole notion of cloud computing, and of bringing infrastructure as a service to startups. “Amazon knocked the ball out of the park,” he said. For Sun, the opportunities are with mid-size and large corporations — like banks, pharma and financial companies — that need to build their own clouds because they cannot use Amazon type on-demand computing due to certain legal and regulatory limitations. (GigaOm)