There was a House in Santa Clara They Called the Rising Sun

So the soap opera we’ve been following for the last month has come to it’s conclusion, with a shocking twist in the final episode. After being spurned by the big blue Knight from Armonk,our heroine, Sun Microsystems, was rescued at the last minute by Oracle, presumably riding on in on white charger. The $9.50/share price is at the the top of the range for the rumored IBM deal, so it’s at least some good news for shareholders.

For Sun’s IT customers it’s good news/bad news. The good news is that Sun will not got nova for the time being, a prospect that was becoming all too plausible in recent months. In the short/medium term (I’m guessing the next 3-5 years) Oracle will continue to service and support UltraSPARC/Oracle customers, to do otherwise would be suicidal.

The bad news is the uncertainty this creates around the long term future for Sun’s hardware products, particularly its UltraSPARC high-end servers. The question is, “What does Oracle plan to do with the hardware business?”, because lets face it, the reason for the acquisition is Java, not hardware. Oracle has seen the future of hardware for databases, and its a commodity-based scale-out cluster; not large, proprietary, and expensive servers. So I believe it’s a question of “when” not “if” Oracle decides to stop further development of Sun’s high-end server line.

For the commodity server products the future doesn’t look too rosy either. Sun’s market share for commodity servers is negligible compared to IBM/HP/Dell which leaves them with two problems that they need to address:

1. There isn’t enough business in just selling hardware for database clusters to support a product line, so Oracle has to decide whether it really wants to be in the hardware business at all.
2. Going into accounts where Oracle is running on HP/IBM/Dell hardware and trying to kick out the incumbent hardware vendor is going be a hard sell and will do nothing to endear Oracle to their former hardware partners.

So you have to wonder why Oracle would choose to spend R&D dollars on x86 servers to go after a small segment of the commodity hardware business and turn their erstwhile partners in the hardware space into competitors.

Posted by: Nik Simpson