Oracle Goes for the Kill

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For a megacompany like Oracle (Nasdaq: ORCL), buying Innobase Oy is barely a blip on the financial radar. Oracle's price tag for the developer of InnoDB database software was not disclosed, but speculation puts it below $5 million. That doesn't mean the deal's not important.

Innobase Oy relies on the open source model for its software development, basing its code on the contributions of programmers across the world. Because the product's source code is freely accessible to anyone who wants to work with it, open-source software is often cheaper than versions from traditional vendors like Microsoft (NYSE: MSFT) and Oracle -- or even free.

Open source has created problems for a variety of software companies. BEA Systems (Nasdaq: BEAS), for example, has lost substantial market share to open-source rival JBoss. Oracle has its own open-source thorn: MySQL AB, which has snapped up many of Oracle's database customers with its lower price point. MySQL wants to be more than just a database product for small companies; in its efforts to take hold at larger companies, it's been adopted by big clients like Hewlett-Packard (NYSE: HPQ) and Google (Nasdaq: GOOG).

Since Oracle's franchise is databases, the Innobase Oy buyout makes a lot of sense. The company is trying to protect its cash cow while putting intense pressure on MySQL AB. You see, the InnoDB Storage Engine is the de facto standard within MySQL; it actually ships with MySQL, netting Innobase Oy a bit of revenue in the process. InnoDB manages the data entered and retrieved through MySQL, and while other solutions can be used, InnoDB is most developers' preferred tool. Over the years, MySQL and Innobase Oy have even worked together to streamline the integration of both products.

It's important to note that the licensing agreement between MySQL and InnoDB comes up for renewal next year. Oracle CEO Larry Ellison, an expert negotiator, may use his newfound leverage to negotiate better terms, which means that Oracle may garner a bigger slice of future MySQL sales.

Ellison likes to remind people that he is a devotee of the writings of Sun Tzu, the Chinese philosopher who wrote TheArt of War in the sixth century BC. Perhaps in Ellison's latest maneuvers, he relied on one of Sun Tzu's many wise statements: "To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself."

Further Oracular Foolishness:

• Lawson: Oracle's Next Meal?
• Larry Ellison: At It Again

Fool contributor Tom Taulli holds no financial position in any companies mentioned in this article.