Fresh Rumors Erupt over Red Hat-Oracle Buy

By Lisa Vaas  |  Posted 2006-08-22

Fresh Rumors Erupt over Red Hat-Oracle Buy

First, rumor had it that Oracle was buying JBoss.

Didnt happen.

Then Larry Ellison reportedly was dissing Red Hat support and making noises about Oracle stepping in to provide that support.

Oracle went (typically) mute about any supposed plans put forth by its free-wheeling head, Mr. "I-dont-check-with-no-stinkin-media-relations-before-I-open-my-mouth" Ellison.

Then there was last week at LinuxWorld, with all the anticipation about Oracle supposedly on the brink of putting out an Oracle flavor of Linux.


This week, the rumor mill is churning about Oracle buying Red Hat. People were contacting me Aug. 22, asking about the possibility.

Since Oracle always checks with me before it buys a company (yes, that was sarcasm), I assured people that no such purchase was imminent. I mean, cmon, they would have called.

OK, so Red Hat was absent at LinuxWorld. Maybe preparing for the wedding, maybe because it figured out that it wasnt worth the money or wasnt generating enough leads.

But then this interesting pitch from a rep at a Sun third-party PR firm came out. To quote:

"Is it possible that Red Hat is quietly readying itself for acquisition by Oracle? The rumor mill is hinting at it, and so do the bloggers. Just type Red Hat Sucks into Google, and watch the slams against Red Hat and its poor-quality support pile up."

(I did just that, and as of Aug. 22, the first thing that popped up was a complaint; the second hit was the first, mild response to that complaint; and the third was a rant from… oh, lets see… yes, the year 2001, that would be. "Piling up?" Uh, no.)

It continues: "There certainly seems to be an increasing level of frustration against the former darling of the Linux world. To add insult to injury, Red Hat was barely present at Linux World.

"If theyre not readying themselves for a sale, theyd better figure something out—because if they alienate their customers with poor quality support, and their developers by ignoring their big show, theyre not going to have a lot of supporters to help them hold out against an industry giant who comes knocking.

"Support/service contracts are the way RHAT makes its money, so if that revenue is eliminated, they become a company in trouble.

"Sun prides itself on an open-source software business model that also features world-class support. If youd like to hear some competitive perspective on how Red Hats weak support offering makes it vulnerable not only to takeover, but to customer defection, please let me know."

There goes Sun, spreading FUD, trying to sow doubt in the minds of would-be Red Hat customers, sounding the siren call of open-source Solaris, right?

Well, nah. Like the other rumors and innuendos, this one was kind of, well, bunk. Turns out it wasnt authorized by Sun, just a self-described renegade flak.


Next Page: The watchers weigh in.

Watchers Weigh In

Before I found that out, though, I got some Red Hat watchers on the phone.

1. Oracle: Supporting Red Hat? Yes? No?

Stephen OGrady of Redmonk:

"The sort of talk around … Oracle taking Red Hat bits and releasing its own version of that showed a lack of understanding of how [Red Hats business model and open-source rules of contributing back to the kernel] works.

"That would be a boon for Red Hat. … It would mean Oracle would be playing catch-up with patching and customization around the kernel that Red Hat puts into its product.

"Oracle would be required to first support all the patches Red Hat puts out. If [Oracle] makes its own custom fixes and patches, it would have to contribute back to the kernel, so Red Hat could take those and resell them.

"If they took Red Hats bits, theyd probably have to guarantee binary compatibility with [one of Red Hats distributions]. Theyd have to ensure that ISVs writing to Red Hat and supporting applications on top of Red Hat would have to work with whatever downstream [add-ons] Oracle would [contribute]."

So why would Ellison talk about it if it didnt make sense?

Gosh, I dont know! How about FUD? Its a good, all-purpose product to put out.

Oracle is now competing more directly with Red Hat, post-its JBoss acquisition, so chest-puffing is in order.

2. Oracle buying Red Hat: Yes? No?

Raven Zachary, of The 451 Group:

"It may be worth $5 billion to $6 billion to acquire Red Hat and get the JBoss business, which didnt pan out for them [when Oracle supposedly looked at buying the company earlier in the year], but thats a fairly hefty cost for whats essentially a free operating system.

"They could [instead] spend $1 billion to launch an enterprise Linux distribution, $2 billion to market why Red Hat isnt relevant [from Oracles perspective], and then they could pocket the other $3B as savings vs. acquiring Red Hat for $6 billion."


"Could you build a case that a Red Hat acquisition would make sense for Oracles business? You could. You have to factor in that theyd also complicate their business at the same time.

"Oracles pattern for growth has been, at least in recent years, about growing on top of an infrastructure: building out the application infrastructure, rather than building back down the stack, into the operating system .

"Thats proved a successful growth strategy for them. Would they grow downward, into the operating system layer? Perhaps, but Im not sure what the benefits are."

Takeaway: Wow, Red Hat is expensive.

3. Oracle rolling its own Linux. Yes? No?


"Well, wouldnt it be much less expensive for Oracle to create its own community distribution? [They could spend] 50 percent [of what it would cost to buy Red Hat] and go buy Novell and use SUSE as the Oracle-Linux distribution.

"Probably even cheaper to throw a billion at the problem and go find a third-tier Linux distribution and hire the team and deploy an Oracle enterprise Linux."

Takeaway: Lets wait and see if Oracle buys a Linux distribution. If it were currently in the process of rolling its own, I think the rumor mill would be buzzing a lot louder about this.

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