Analyst Expects Oracle to Trim Half of Sun’s Employees

OK, well, somebody had to come out and say it first at some point. And that somebody was Brent Thill, a San Francisco-based software industry analyst with the international wealth management firm UBS AG.

Thill came out with a report for his clients Jan. 13 — first reported by Bloomberg News — that surmises that when Oracle finally acquires Sun Microsystems, it most likely will have to cut jobs — a lot of them — to enable the big, immediate profits it has been promising its investors.

Thill, formerly with Prudential and Citi, said he expects Oracle to slash almost 14,000 of Sun’s 27,600 employees.

The fact that Oracle will have to trim all the duplicate positions Sun will bring in the annexation is a given. But 14,000 people? Heavy. If it, in fact, lets that many people go, Oracle will be cutting out entire Sun divisions and a lot of research and development from itself going forward.

Thill made the news because he was the first one to report what everybody involved has been talking about for months: How bad will the layoff damage be?

A little background: Oracle announced on April 20, 2009, that it intended to acquire Sun for about $7.4 billion, making no secret of the fact that it wants to evolve into a full-service IT supplier that includes storage hardware and software. But the deal has taken the better part of a year to close.

The federal Department of Justice, charged with enforcing antitrust laws in the United States, hasn’t been a deterrent. It approved the transaction in August 2009.

However, the Brussels-based European Commission, which serves as the law enforcement body of the 27-nation European Union, has been balking at this transaction for nearly six months. The major sticking point is the European-developed open-source database that Sun bought for $1 billion two years ago: MySQL.

The EC has been withholding its blessing on the deal, ostensibly needing to be satisfied that MySQL will be allowed to innovate and compete fairly in the IT marketplace.

The assertion that Oracle’s own proprietary database often competes directly with MySQL is seen by many industry people as an obvious conflict of interest, causing most of the friction. Oracle CEO and founder Larry Ellison contends that MySQL has its own user base and does not compete directly with his company’s highly profitable databases, but a large number of people working in the field disagree.

The two sides have been going back and forth for months. The EC has completed its due diligence, and Oracle has promised that it will protect MySQL’s integrity.

The EC is due to make a decision no later than Jan. 27, 2010, about whether to sanction the acquisition, so that Oracle can close the deal and continue to do business in Europe as a full-service systems vendor. And Oracle does a lot of business in EMEA.

Meanwhile, a lot of people are getting their resumes in order.