Oracle's Pyrrhic Victory?

It's beginning to look a lot like a merger. European regulators are warming up to the idea of Oracle (Nasdaq: ORCL  ) buying Sun Microsystems (Nasdaq: JAVA  ) after many months of skepticism, and it's all because Oracle has promised to treat Sun's database product right.

The European Commission is now "optimistic" that a "satisfactory outcome" can be reached in the Sun-Oracle deal. That positive statement came on the heels of Oracle posting a list of commitments designed to keep MySQL alive after the merger. MySQL is an open-source product that competes in many ways with Oracle's flagship databases, and the commission has been worried that the business combination would remove a serious competitor from the database market.

Personally, I don't think that Oracle should buy Sun at all, but unfair competition in the database sector is the least of my worries. PostgreSQL continues to carry the open-source database banner, and Sybase (NYSE: SY  ) is still an independent database vendor. Even if those two bastions of database choice were to go under somehow, I don't see giants like IBM (NYSE: IBM  ) and Microsoft (Nasdaq: MSFT  ) getting out of the database race for many years.

No, the Sun deal is simply bad business. Oracle knows little about hardware, which is what Sun is good at. This deal positions Oracle closer to IBM and Hewlett-Packard (NYSE: HPQ  ) as an all-around provider of everything, and I suppose there might be some synergies in there somewhere. But mashing together two very different corporate cultures often spells disaster, and when you sell everything including the kitchen sink to your customers, you end up competing with old partners like HP and Dell (Nasdaq: DELL  ) .

So I guess the Sun is going down as planned, just a bit later than expected. It's just hard to see any benefits of going through with it, whether or not MySQL is part of the package.

Fool contributor Anders Bylund runs a few MySQL databases, but he holds no financial position in any of the companies discussed here. Dell and Microsoft are Motley Fool Inside Value recommendations. Motley Fool Options has recommended a diagonal call strategy on Microsoft. The Fool owns shares of Oracle. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On December 16, 2009, at 3:00 PM, leunam870 wrote:

    muy bueno

  • Report this Comment On December 16, 2009, at 3:31 PM, hardlyb wrote:

    I know people at Oracle, and I've heard from reliable sources that there is a LOT of interest in the specialized boxes that Oracle has proposed to build with Sun hardware. Also, Sun was terrible at anything to do with product marketing - I have a close friend that was brought in to a high-level research position at Sun, and he told me that he had never seen anyplace as disorganized. This friend said that the company had no idea how to deal with the PC+Linux threat, and they thrashed and changed directions constantly. He also said that the amount of money they wasted on everything was shocking. Oracle will at least end that - they run a lean operation (I worked for them for a decade, and they got much better organized during the time I was there, although it was still a very good place to be an engineer - mostly they stopped letting groups fight with each other so much).

    I don't know of if this will be a good deal for Oracle or not, but I think that Larry and his team understand their business pretty well, and he hasn't driven his company into a ditch yet.

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