Analysts Evaluate Oracle/Sun Acquisition
April 22, 2009 -- The IT landscape continues to consolidate at a rapid pace. On Monday, Oracle announced it was acquiring Sun Microsystems for a tidy $7.4 billion. Oracle President Safra Catz estimates that Sun will contribute more than $1.5 billion to Oracle's non-GAAP operating profit in the first year. "This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined," says Catz.
While this latest deal undoubtedly strengthens Oracle's position as the dominant leader in IT acquisitions, we asked industry analysts how it will affect the solutions and services market, especially for the consumer goods market. Here is what they had to say:
While this latest deal undoubtedly strengthens Oracle's position as the dominant leader in IT acquisitions, we asked industry analysts how it will affect the solutions and services market, especially for the consumer goods market. Here is what they had to say:
"Overall, this elevates Oracle into an exclusive group of technology providers, like IBM and HP, who have software, server and storage technology. How does Sun complement Oracle's offerings? Well, it makes it faster and simpler to get software/hardware to work together with Oracle appliance offering for any piece of Oracle software -- from applications to middleware to data warehousing and analytics. Many in the consumer goods market need to continue to reduce IT costs for infrastructure and spend more on solutions in areas like trade promotion, pricing optimization, sales and channel analytics and consumer insights along with better information systems that bring together a wide range of information and analytics for business. Oracle will continue to expand their portfolio and take an even larger presence in consumer goods market with infrastructure but will need to address large need for business solutions across demand/supply chain and analytics that align to managing the forward-looking need of these organizations." -- Mark Smith, CEO & EVP Research, Ventana Research
"Sun was selling at an attractive price, and Oracle took advantage of the market opportunity. This will position Oracle more aggressively against IBM." -- Lora Cecere, Vice President, Consumer Products, AMR Research
"In many ways, the current economic downturn is bringing about this IT industry inflection point, as vendors prepare for the next wave. The deal comes at a time of industry transformation, where technology convergence (servers, storage, software, networking connections and services) is re-making the enterprise data center -- and changing the way service providers deliver business value to their end customers, either directly or through cloud computing. Oracle said that it is considering building end-to-end technology stacks, leveraging Sun's servers, storage and software, along with Oracle's database, middleware and applications software -- but it is too early in the acquisition process to predict what form this will take." -- Crawford Del Prete, Executive Vice President of Research, IDC
"Given that Sun owns many of the open source versions of software products that compete with more expensive, more feature-intensive programs from its acquirer, Oracle likely will cut off Sun's support for those offerings. [MySQL, the open source database Sun purchased for $1 billion in January 2008, along with Glassfish, Sun's open source application server, are two products that may not find much support as part of the Oracle empire.] Sun has its own open source, lightweight stack of software products, and I have a hard time imagining Oracle won't kill some of those or spin them out." -- Frank Gillett, an analyst with Forrester Research (excerpt from Forbes)
The Board of Directors of Sun Microsystems has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.