Oracle, Sun Deals Further Consolidation Push

Oracle's BEA purchase continues the company's three-year buying spree; Sun expands its reach in the database, open-source software markets with MySQL.

The separate acquisitions by Oracle and Sun Microsystems are the latest examples of consolidation within the enterprise software space, according to analysts.

Oracle, with its $8.5 billion purchase of BEA Systems, will add to its three-plus-year buying spree, in which it's spent more than $25 billion buying buying companies such as PeopleSoft, Siebel Systems and Hyperion Solutions, all of which at one time were Oracle competitors.

For Sun, it's $1 billion bid for MySQL will boost its position in enterprise IT to include the $15 billion database market, company officials said.

Oracle's announcement came three months after first broaching the idea of buying BEA. The amount is 14 percent more than Oracle's initial bid for BEA in October.

Some analysts view Oracle's deal as merely an attempt to grab market share.

According to a notice issued by research firm Gartner, "Oracle's main motive is not to acquire technology, but to gain market share. If a deal is finalized, Oracle would emerge as a portal, process and middleware vendor with revenue second in size only to IBM, the market leader."

Gartner's notice also said that IBM and Oracle "would be the main players in the Java-centric middleware market, well ahead of the remaining vendors."

Along with giving it a significant push into the database market, Sun's deal reaffirms Sun's position as a provider of Web-related platforms and as a primary provider of open-source solutions, as well as a key contributor to open-source projects.

Sun officials said MySQL's integration with Sun will extend the commercial appeal of the database vendor's offerings and improve its value proposition via Sun's global services organization. MySQL also gains new distribution through Sun's channels, including its OEM relationships with Dell, IBM and Intel, Sun officials said.

Sun will pay about $800 million in cash in exchange for all MySQL stock and assume about $200 million in options. The transaction is expected to close late in the third quarter or early fourth quarter of Sun's fiscal 2008, Sun officials said.

The acquisition of MySQL also bolsters Sun's claim to open source fame, and serves as further evidence that open source technology is making inroads into the enterprise.

MySQL is the most popular open source database in the market, and it makes up the "M" in the LAMP (Linux, Apache, MySQL, PHP/Perl/Python) stack. That point was not missed by Rich Green, Sun's executive vice president of software,. "This is the most significant acquisition Sun has done in all of my years here," Green said during a conference call with analysts and reporters.

Bill Miller, CTO at XAware, said Sun's acquisition of MySQL is "the latest confirmation that the open source software model is fundamentally changing the software industry. Established players have to change. Sun learned the painful lessons of open source disruption earlier than most as Solaris lost market share to Linux, taking their competitive advantage in hardware with it. Through pain comes change. Sun has demonstrated that it understands the shift taking place and is working diligently to adapt its business."

"It's a big move for Sun to get into the DBMS space," said Anne Thomas Manes, an analyst with The Burton Group. "Good move, too, to go for the golden child open source vendor," which is not Sun's typical modus operandi, she said.

Still, given Sun's history of enterprise technologies, "I'd have expected them to go for someone like EnterpriseDB instead. But MySQL definitely has a lot more cache," Thomas said.

She said Sun CEO Jonathan Schwartz's goal is to go 100 percent open source.

"Having a DBMS to complement the rest of the Java System suite puts them more on par with the super-platform vendors-IBM, Oracle, and Microsoft," Manes said. "Not that the industry perceives them in the same league at the moment, but at least it puts them in closer contention."

Raven Zachary, an analyst with The 451 Group, agreed that it was a good move for Sun. The deal, Zachary said, "answers the question of 'SunDB' that [former Sun CEO and current board Chairman] Scott McNealy posed several years ago. In that time, Sun has pursued a PostgreSQL strategy in the open source space, and this raises a whole bunch of issues concerning Sun's close ties to Oracle, as well as their investment in PostgreSQL."