IT Community Beware Oracle Buyout of Sun Microsystems

First published June 16, 2009
All rights reserved.

As the European Commission mulls over the Oracle takeover of Sun Microsystems' shareholders' assets and the likely resulting destruction of competition, the past bizarre actions of Sun Microsystems' senior management regarding the purchase of MySQL for 1 billion USD become clear (Sun never recovered this reckless investment). It seems to me MySQL was purchased years ago by Sun so Ellison could appear to make concessions to government antitrust agencies if they gave him any trouble when he finally took over Sun. Everybody focuses on a proprietary database giant (Oracle) controlling the opensource database giant (MySQL), and ignores Ellison's true main target: Java. Ellison gives in a little bit, or even spins off MySQL, and everybody walks away happy. Turns out the MySQL uproar is nothing but a red herring. And the actions of the IT Industry captains is just as bizarre as Sun's 'management'. Seriously, Microsoft whining about the buyout?? MySQL is actually a bigger threat to Microsoft's SQL Server database business than to Oracle's database business, as Oracle is considered the high-end system. So SQL Server is even more vulnerable to MySQL competition. But the Java threat has been a thorn in Microsoft's side since it appeared in 1995, threatening the Windows franchise with Java's promise of platform independence. How nice if Oracle would take it out of play for Microsoft and turn it into a proprietary platform. Microsoft is delighted, not upset with the proposed buyout. And where is IBM, who invested heavily in Java and related development tools?? Not even a peep out of them. Very strange that they not only backed out of negotiations to buy Sun in early 2009, bowing to Oracle's bid, but that they are not screaming bloody murder even now. And Google has taken no position on the debate, with their Android operating system for phones relying upon Java-based libraries?? Give me a break. The IT Industry captains with their carefully scripted meek responses to the Sun Microsystems buyout should be regarded with a great deal of skepticism.

In the end, there is only one Java, but there are many database options besides MySQL. So the true threat to competition and pricing in IT involves Java, not MySQL. While Sun has been a good steward of Java with customers, developers, businesses and even competitors, you cannot expect the same from Oracle. They have a much different corporate mentality. The only fair and reasonable concession that Oracle could possibly make with this buyout is to spin off Java entirely before the buyout. If this is required by the European Commission, you can bet Oracle will call off the Sun Microsystems buyout entirely.

Pretty sad that American's have been let down by our own 'Justice' Department with their ill-considered rubberstamp response to Oracle's 'purchase' of Sun. But now American's have to rely upon the European Commission for justice in our own country. If they too let Oracle take over Sun without spinning off Java, it will be a sad day indeed for the entire IT Industry.

Don't expect Oracle to dump Sun's hardware business, as has been suggested by some 'analysts'. For now this apparent lack of direction by Oracle will pacify their future server hardware competitors, HP and IBM, until it's too late. Other Wall Street analysts believe Oracle will keep the server hardware business to avoid losing customers who currently run Oracle databases on Sun servers. Right answer, wrong reason. Databases are harder to replace (from both the software integration and administrator training perspectives) than server hardware. But these analysts overlook an even better reason to keep the hardware business. In particular, Oracle will likely modify Sun's SPARC chip and Solaris operating system (or maybe Linux) to run Java programs native alongside SPARC's own native instruction set (essentially dual instruction sets on a chip), like Sun could have done all along (see http://www.squidoo.com/SunOracleBuyoutShareholderLetter). This gives Oracle a huge competitive advantage over other hardware manufacturers, whose computers would still interpret Java programs as they do today, running them much slower. No, Sun's server hardware is a key component to Oracle's plan to dominate the business IT industry.

As for HP, the 'Oracle DB on HP servers' partnership business will fade away. Maybe no big deal, but both HP and IBM can now try to compete with Java running native on Oracle servers. Pretty bad when both companies' own Java-based system software runs much faster on a new competitor's hardware. Another option, maybe only Oracle's Java software will run faster, perhaps based on a new and proprietary Java version designed only for Oracle's new hardware. But then you're not destroying Intel (see below) and the other server hardware manufacturers. No, the proprietary Java version can come later after you've destroyed the hardware competition.

Also look for Oracle to start manufacturing Java-based mobile devices like netbooks and phones, again probably supporting native-Java on these devices. Ellison said it himself at the JavaOne 2009 conference, when he talked about these mobile devices: "I think we can see lots and lots of Java devices... But I don't see why some of those devices shouldn't come from Sun-Oracle... They'll be computers fundamentally based on Java and JavaFX." Look out Microsoft (Windows Mobile software) and Blackberry (business phones based on Java).

Here's a sleeper you didn't think of. Oracle might also make a play for chip manufacturer AMD (market cap $3B, as of mid-June, 2009). Oracle could run dual instruction sets (with native-Java) on these Intel-lookalike chips, refuse to license the native-Java technology to Intel, and eat Intel's lunch. Java programs would run relatively slowly on machines with Intel chips (because they are still interpreted with the Java VM as they are today), and just scream on machines with Oracle's new AMD chips. Yikes.

Besides selling data servers and tape backup equipment, Sun also has expertise in high-performance switches, which they had to build in order to connect massive numbers of computers together for their grid. Somewhere down the road I would expect Oracle to use that expertise to compete with Cisco, or maybe buy a networking gear outfit like Cisco did with Linksys. Why leave Cisco with the networking profits ? With end-to-end hardware, Oracle could make guarantees to customers when every piece of hardware is theirs. This entails selling printers too. Look out HP with their fat ink margins.

After all they have invested in Java over the years, you have to wonder what IBM was thinking when they backed out of a deal with Sun, bowing to Oracle. The price is relative pocket change for them, but to leave Java in Ellison's hands when it's so important to IBM ?! Certainly Sun was a benevolent steward of Java technology, even with their competitors. Will Oracle be as fair and neutral ?

At the JavaOne 2009 conference, Ellison said "Oracle's middleware strategy is based 100% on Java. Our whole next generation of business applications... is built entirely on Java... And I think we're going to continue to invest and accelerate our investment. So we see increased investment in Java."

There you have it. Since he's already using Java, it would seem there is no reason to own Java unless he had other plans for Java and wanted to prevent his competitors from using that technology. After all, Ellison could have simply signed a contract with Sun to ensure his continued access to Java, even if Sun was sold to a third party. No, the endgame involves more than continued access to Java. I believe Ellison's 'increased investment in Java' is the native-Java strategy that I previously discussed, which will be denied to his competitors.

As for office productivity software, Sun heavily sponsors OpenOffice (includes word processor, spreadsheet, presentation, drawing, database, etc. software) and has an enhanced Suite based on OpenOffice called StarOffice. Ellison said "One of the things we're looking forward to is seeing libraries come out of the OpenOffice group that are JavaFX based." So, expect this office productivity software to be heavily promoted by Oracle in order to damage Microsoft's Office market share. Remember that businesses like a throat to throttle in the event of a problem, so they sometimes shy away from open source software, like OpenOffice. But with Oracle heavily promoting OpenOffice for free or StarOffice at a far cheaper price than Microsoft Office (with an optional service contract), expect Microsoft to lose market share with its cash cow.

Sun bought the widely-used open source database MySQL for $1B awhile back. You can download and use the software for free but Sun also offers service contracts for a fee. Strangely, Sun didn't have to own MySQL to offer these service contracts. Sun offered service contracts for PostgreSQL for Solaris, and didn't own PostgreSQL (another open source database from UC Berkeley). Still it's lucky for Oracle that MySQL is conveniently bundled in the Sun deal. Gee, I wonder what database vendor Oracle will do with the widely-used, open source and free database product called MySQL ? I give up, you tell me. Anyway, I expect Oracle to stop offering Sun's MySQL service contracts, and not renew contracts as they expire, because they decided to 'focus on their core database technology'.

And don't forget Sun's virtualization and system management tools. End-to-end software. Bottom line ? Oracle can make guarantees to customers when every piece of software is theirs too. And with their new domination in hardware and software, consulting contracts will come much easier. So expect Oracle to expand heavily into consulting, damaging IBM, HP, and independent consultants. Seems like old Ellison has played the industry captains like a cheap guitar.

At the JavaOne 2009 Conference, Scott McNealy gave Larry Ellison an opportunity to address the developers' concerns about how they fit in with Oracle's plans when he asked "So any messages or key areas you'd like to see this gang target ?" Ellison essentially gave developers the 'virtual finger' when he said nothing about how Java developers fit in with Oracle's plans, instead talking about Java-based mobile and netbook devices, and related software coming from Sun-Oracle "So I think you'll see us get very aggressive with Java and developing Java apps for things like telephones as well as netbooks."

Need more ? When McNealy spoke of developers' concern over Java's future, Ellison stated "...I don't expect a lot of changes..." A very non-committal answer. Do you believe Ellison has no say in what happens to Java ? He also said "Clearly if you're curious about what's going to happen in the future, I think you have to look at the past." So let's look at Oracle's past. The last time Oracle bought a multi-platform development tool that targeted mobile devices like Pocket PC, Palm, Symbian and Blackberry, they bought the intellectual property, but not the company (AppForge). Essentially this took the development tool and associated runtime off the market, and left AppForge developers and their customers high and dry with absolutely no warning or notice. Developers and their customers who legally bought AppForge's runtime product couldn't even activate their licenses after the buyout. What harm would it have done to Oracle if they continued to support AppForge's customers ? Oracle didn't manufacture competing mobile devices or even a competing multi-platform mobile development tool. Yet they saw to it that developers and their customers were screwed by the deal. I don't get a good feeling about Oracle's future support for Java developers when I look at Oracle's history, as Ellison himself suggested we do.

And what happens to NetBeans, a widely-used Java development tool, with Oracle promoting their JDeveloper tool ? Or the free and open source GlassFish Java application server, with Oracle promoting WebLogic ? Or OpenSolaris ? Dust off your crystal ball.

With developers getting squeezed out, look for fewer software choices for business customers, unless they directly support Oracle's Fusion project.

What happens to prices when one company dominates the entire IT industry, from hardware to software to consulting ?

Oracle's product and service breadth is now IBM, HP, Microsoft and SAP combined, on steroids. The new IT bully will squeeze your margins and opportunities like a pimple. Good luck with that.

An open letter to Sun Microsystems' shareholders telling them to vote 'NO' on the proposed Oracle buyout and describing how Java could be monetized:

http://www.squidoo.com/SunOracleBuyoutShareholderLetter