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King Larry launches Oracle-Sun combo at Big Blue, Cisco

Big Red wants a piece of HP, too

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Oracle has the advantage of having the second-largest application software business in the world, and the Sun-Oracle deal may just do something that has been rumored many times in the past: get IBM to acquire German software giant SAP. There could hardly be a more natural fit for Big Blue than SAP, considering that it was founded by some ex-IBMers back when mainframes were not only cool, but basically the main computing environment available. Then IBM and Oracle would have similar sales pitches, leaving Cisco and HP out in the cold without applications.

How very AS/400-like that would be.

Team Reg will be picking this Sun acquisition apart with scalpels, looking at the implications for servers, storage, operating systems, databases, and such. Oracle will not give out precise details about product roadmaps until the deal closes, possibly this summer, but the company did put out a FAQ file for customers and partners (here), a basic presentation (here), and a statement from Charles Philips, Oracle's co-president (here).

On the call with analysts and journalists (the replay was finally posted), Safra Catz, Oracle's other co-president, said that Oracle would be using a mix of cash and debt to acquire Sun, and that the company believed that the Sun unit could deliver $1.5bn in non-GAAP operating income per year, and then grow from there. She added that Oracle believed that Sun, once integrated into Oracle, would be accretive to earnings by 15 cents per share - making the acquisition more profitable than the acquisitions of PeopleSoft, Siebel Systems, and BEA Systems combined.

Clearly, there are some pretty big layoffs coming to Sun again to make such numbers work. And lest we wonder about Oracle's intent, Katz said that Oracle would combine the software units quickly and that Sun's x64 and Sparc systems would be oriented to their joint, existing enterprise customers.

"We intend to ensure that it is a profitable operating unit within Oracle," Catz said, referring to Sun's Systems Group.

Ellison piped up that in Oracle's opinion, Solaris was the best Unix in the market, and reminded everyone that more Oracle databases are deployed on Solaris than any other operating system, but that Linux is number two on the list and that Oracle's commitment to Linux has not been diminished one iota by the acquisition of Sun. Ellison then added that Oracle would now be able to tightly integrate Oracle databases and the Solaris operating system, and offer customers a "complete integrated computer system, from database to disk."

Sun co-founder and chairman, Scott McNealy, said somewhat unenthusiastically, that the merger was the "next big step" in the two-decade partnership between Sun and Oracle, and that it was a "truly momentous day for the industry" and that Sun was "thrilled to be acquired by Oracle."

Schwartz added that the deal brings to market a "new leader" and an "industry phase change" that collapses many different markets into one player - a sales pitch Sun itself has been using, especially since it acquired MySQL in January 2008 for $1bn. Schwartz added that Sun would be the largest contributor to supplier of open source software, and then waxed a little poetic. (Inhale.)

"There is no question in my mind that this transaction redefines the industry, redefining the boundaries that have frustrated the industry's ability to solve the problems that customers seek to solve, eliminating the cost and complexity of an industry that focuses on components instead of systems," Schwartz said. "The combined Oracle and Sun will be just that: a systems and software powerhouse."

Philips got to speak last on the short call, and said that Oracle spends a lot of money making sure its databases, middleware, and applications all run properly on a wide variety of different piece parts, but that by "engineering a true system" Oracle would be able to eliminate costs and reduce the total cost of ownership of its systems. He said that Oracle might, for instance, deliver ready-to-deploy servers, "a complete industry in a box" on a Sun-Oracle appliance.

Of course, cutting those software engineering and testing costs Philips mentioned would mean eventually not supporting other non-Oracle stuff. But Philips didn't say this was the plan, and even if it is, Oracle has to say it isn't at least for the near term. ®

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