Why Oracle-EMC Merger Makes a Lot of Sense

If you look at the evolution of the enterprise stack, an Oracle-EMC merger makes "a lot of sense," said Ken Male, principal analyst and founder of TheInfoPro, which does research for Fortune 100 companies, vendors and financial services firms.

"We've been talking with investors for the past few quarters about how there are going to be more mergers and acquisitions as companies are looking to build the enterprise stack," Male told eWEEK. "HP is almost there first now, with its strong server play, having bought 3PAR [first-tier storage], ProCurve [networking] and 3Com [networking]. Oracle bought Sun, which was one of the first moves in this trend.

"This is all part of the current evolution in which these companies are looking to have an 'arms race' to build out their own integrated stacks. EMC, the 800-pound gorilla in storage, and VMware, with its 80 percent of the virtualization market, are huge assets that would make a natural fit for Oracle," Male said.

Bottom line: Is this a deal that's going to happen?

"Right now, I'd have to say probably not," Male said. "But if we're having this conversation a year from now and EMC is still a stand-alone company, I'd have to say it would be much more likely."

Analyst Rob Enderle of The Enderle Group told eWEEK that a takeover by Oracle of EMC "would seem doubtful as EMC's leadership is very independent and they aren't facing a major problem that this merger would fix.

"Their opportunities would seem stronger independent of Oracle than as part of them," Enderle said. "The cost of this acquisition would be daunting as well. However, Oracle needs to distract investors from their excessive executive salaries, and sometimes a major acquisition attempt like this will do that."

Oracle still needs to fill gaps

Does Oracle need to be gobbling up more companies? It already claims to be "Hardware/Software/Complete," according to its marketing line.

"They are still light on the hardware side against IBM, who is their long-term rival, and have indicated they would like to buy a chip company," Enderle said. "There is a lot of work going on right now surrounding ARM servers, and they might want to get ahead of that given this is both a direction that Microsoft is exploring and IBM may not want to go."

Enderle added that "Oracle is clearly in the hunt to buy something. [Co-President] Safra [Catz] likes doing acquisitions. Sadly [co-President] Mark Hurd hates them, and that dynamic may make doing them well much more difficult this round as Hurd needs to discredit Safra to get her out of his way. And it is hard to believe that she doesn't see him coming. I expect there is high drama at Oracle at the moment."

Analyst Charles King of Pund-IT told eWEEK that such an acquisition "seems like a stretch to me, though it would give Oracle a far more attractive, innovative and competitive storage line than they acquired in the Sun deal."

EMC leadership positions in storage hardware and software mean the company would sell at a much higher premium than Sun, and its majority stake in VMware would likely be a major stumbling block, given the degree to which Oracle's competitors depend on the technology, King said.

"In fact, if Oracle were to try to move on EMC, it's likely that other bidders with equal or even deeper pockets would enter the fray. I try never to say never, but this seems exceedingly far-fetched," King said.

Oracle, like other large vendors with healthy balance sheets, is helping to drive continuing IT industry consolidation, so King said he doesn't expect the company will halt or slow its shopping spree anytime soon.

"That said, while they claim to be 'complete'-note the lack of 'services' in that marketing statement-if Oracle were to make any sort of dramatic acquisition-and with Mark Hurd now safely onboard, that seems likely-I'd keep an eye on IT services players as potential targets," King added.