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Recurring Revenue: Article

Oracle-Sun: IBM Reportedly Behind Delay

IBM has plenty of practice using the European Commission to attack its enemies. Just ask Microsoft.

Well, well, well, a little bird points to IBM as gumming up the works with the European Commission so Oracle and Sun can’t close their deal.

Oracle of course picked up Sun after IBM’s negotiations with Sun failed and Oracle made IBM the intended target of the proposed acquisition in an ad on the front page of the Wall Street Journal last week so the idea that IBM is whispering in the EC’s ear makes perfect sense.

And IBM has plenty of practice using the European Commission to attack its enemies. Just ask Microsoft.

Oracle CEO Larry Ellison claims the European Commission’s prolonged investigation of Oracle’s proposed acquisition of Sun, which isn’t expected to finish much before the agency’s mid-January deadline, is costing Sun $100 million a month in revenues and a weakened revenue stream will impact how many employees Sun gets to keep if and when the acquisition is approved.

Ellison, who was interviewed on-stage after a Churchill Club dinner Monday evening by former Sun president and COO Ed Zander of all people, told the crowd, “The longer this takes, the more money Sun is going to lose, and that’s not good for anybody. We want to get this done to save as many jobs as possible.”

Sun’s fretful accounts either just aren’t buying because of the uncertainty of Sun’s fate and continued investment in its product lines or are being run off by IBM and HP. Ditto a lot of its resellers anxious over their revenue streams.

And to meet Oracle’s goal of wringing $1.5 billion in operating income out of Sun the first year after the merger closes, ace Wall Street analyst Toni Sacconaghi now estimates that Oracle will have to fire half of Sun’s people, 15,000 souls.

Ellison said he thinks the EC is going to approve the merger just like the Justice Department did in August without any strings attached.

He said he means to keep all of Sun and won’t sell off any of it, as has been widely supposed he would.

“We are keeping everything,” he said. “We’re keeping tape. We’re keeping storage. We’re keeping x86 and Sparc. And we’re going to increase investment in all of them.”

That means keeping rival open source database MySQL, whose future the EC claims to be so worried about and, it’s been conjectured, may force Oracle to spin it off. Ellison doesn’t think so. Oracle and MySQL serve different purposes, he said, and “do not compete at all.”

“We’re not going to spin it off,” he said, claiming the EC is going to decide the Sun merger is a wholly pro-competitive deal.

The reason he wants Sun and all its satellites is to turn Oracle into the new IBM like Byzantium was the new Rome.

Not the IBM of Lou Gerstner or Sam Palmisano, he said, but the IBM of TJ Watson, “when IBM really was the dominant software company” and its “hardware and software was running most of the enterprises on the planet.”

In Ellison’s opinion, “TJ Watson’s IBM was the greatest company in the history of enterprise in America” and “We think with the combination of Sun technology and Oracle technology we can succeed and beat IBM. That’s our goal. We have a deep interest in the systems business. We think that by combining our software with hardware that we can deliver systems that can be the backbone of most enterprises in America and around the world.”

Oracle, which reportedly doesn’t see Microsoft as a competitor any more, is currently working on a five-year plan to realize Ellison’s dream and Ellison, 65, told Zander he intends to stick around to see it happen.

Cloud computing, a faddish term thought up by “some nitwits on Sand Hill Road,” apparently won’t feature much in the plan. According to Ellison, the cloud’s “not water vapor. It’s databases and operating system and memory and microprocessors and the Internet!”

“All it is is a computer attached to a network.”

“My objection to cloud computing is the fact that cloud computing is not only the future of computing, it is the present and the entire past….What do you think Google runs on?”

Oracle’s not interested in Sun’s hardware per se but its hardware as the basis for end-to-end systems integrated “at the engineering level” with Oracle’s software. Ellison wants to peddle airline reservation systems and banking systems.

Larry’s quest for world domination will presumably be impeded by what he sees as slow economic recovery. The consumer is tapped out and up to his neck in debt, Ellison said, creating an “L-shaped” non-recovery for the next five years and involving some “fundamental changes.”

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at) or paperboy(at), and by phone at 516 759-7025. Twitter: @MaureenOGara

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