I'm usually not one for bashing analysts, but a recent report from Jefferies & Co. -- which suggests that Oracle (Nasdaq: ORCL ) will soon enter the Linux business -- borders on the preposterous.
My problem isn't with analyst Katherine Egbert's sources, or her conclusion that Oracle is talking with the makers of Ubuntu Linux about working more closely together. My problem is that she believes the collaboration could result in an Oracle-branded Linux appliance. Frankly, I think that's crazy.
Oracle has built a thriving network of third parties that help it to deliver software. Server makers such as Sun Microsystems (Nasdaq: SUNW ) , IBM (NYSE: IBM ) , and Hewlett-Packard (NYSE: HPQ ) are all partners of the database king in that regard. A Linux appliance might as well be a Linux server in that it would have to at least be able to run Oracle's core database applications. And that, naturally, would pit Larry against his best server allies. I refuse to believe Ellison is that stupid.
More likely to me is Egbert's second thesis, which says that Oracle could bundle Ubuntu Linux in a stack of software designed to run on any server. Doing so would provide a fast track to Oracle applications for small businesses and, at the same time, obviate the need for infrastructure software from Red Hat (Nasdaq: RHAT ) or Novell's (Nasdaq: NOVL ) SuSE Linux division.
And yet I find even this scenario somewhat difficult to believe. Ellison has long been known for veiled threats, and I think that's what we have here. Why? Threats don't cost much and Oracle has a lot to lose -- 80% of the Linux database market at last count. That means his company has to work with Ubuntu whether it wants to or not. If, in doing so, Larry wants to make Red Hat or SuSE a little nervous, great.
Besides, it's practical for Oracle to have alternatives. Red Hat is amassing a formidable software stack of its own, thanks to the acquisition of the JBoss application server. And Red Hat probably has enough capital to purchase the MySQL open-source database and go head to head with Oracle any time it wants. Ellison would hate to see that occur.
The harsh truth for both Oracle and Red Hat is that they need each other in a world that's otherwise dominated by Microsoft (Nasdaq: MSFT ) . No amount of saber rattling will change that reality, and Ellison knows it.
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Fool contributorTim Beyersowns shares of Oracle. He's also long the stock inMotley Fool CAPS, our new service where Fools collaborate to rate thousands of stocks. Get in the game today. And to get the skinny on all the stocks in Tim's portfolio, check his Foolprofile. Microsoft is an Inside Value pick. The Motley Fool's disclosure policy sees all.