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Oracle CEO gets strategic with Red Hat name calling

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Analysis Red Hat chief executive Matthew Szulik has written an open letter to Larry Ellison, essentially accusing Oracle of being a relic of a dying enterprise software age, which has served its own interests rather than those of customers for 30 years.

Szulik's mildly worded letter appeared in the Financial Times on Thursday, shanghaiing the very pink pages Ellison had co-opted just five days earlier to share with the world his thoughts on how Oracle may buy a Linux distro.

Szulik has been joined by Scott Handy, IBM's vice president of Linux and open source, who made it clear IBM ain't gonna be re-assessing its relationships with anyone just cos' Red Hat bought JBoss. Ellison used his FT piece to lump IBM in with Oracle, saying both must re-assess their relationships with Red Hat since it bought their mutual competitor, JBoss.

The slowly gathering backlash against Larry's comments are almost as predictable as Ellison's words themselves. Larry's outburst blends some good-old-fashioned ERP/CRM vendor politics calculated to freeze the competition with the passions of the jilted lover who knows he's lost something of great value.

And looking at Wall Street's initial reaction to Larry's comments on Monday, it would seem his words have had an early effect in freezing Red Hat. The company's share price fell seven per cent as analysts squawked that Larry had confirmed their fears of price competition. Market-leading quarterly growth in the hot technology area of Linux had, at least until now, helped bolster Red Hat's status on Wall Street.

As you would expect, Red Hat responded to steady everyone's nerves. What would you do if Larry took a bite out of your share price and set the feathers flying on Wall St? IBM also had to come out against Larry. IBM has invested too much in Linux as its operating system of choice against Microsoft's Windows to get sucked into a partisan war of Red Hat versus Novell sparked by the whim of one chief executive. IBM uses both Red Hat and Novell judiciously to give customers what they want and to help keep Windows out of accounts.

So what is Larry up to? The obvious conclusion was to assume Larry is trying to crush Red Hat, who moves from partner to platform competitor by owning JBoss. However, the numbers speak for themselves: Red Hat's revenue comes in at $278m compared to $13.4bn for Oracle. On revenue, Oracle has little to fear. Don't forget, too, JBoss was a loss making operation offering relatively little competition as a corporate entity.

However, JBoss' middleware was posing a challenge to closed-source middleware providers, and there in lies the rub: growth.

JBoss is getting increasing traction while Red Hat's quarterly revenue is growing at 37 per cent - twice that of Oracle. Maybe there was something too Szulik's words, when he wrote in the FT that the JBoss acquisition represents an opportunity to grow, by appealing to both customers and developers.

It's only natural, then, that Larry should want to scare investors and customers about the competition while assuring everyone he is on track to fill the gaps in Oracle's software stack and product roadmap. That's a trick Oracle's software partners have accused the company of using in the enterprise resource planning (ERP) and customer relationship management (CRM) markets. In response to customer requests for features in its software, Oracle will say it plans to offer "X" feature 18 months down the line effectively freezing out smaller partners. Customers decided to wait for their number-one database/applications provider to deliver the goods to keep things simple by purchasing from a single supplier.

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