With Sun, Oracle has all the pieces

Written by New York Times | Updated: Jan 29 2010, 03:58am hrs
Ashlee Vance

Oracle, having spent the last nine months fighting rivals and regulators in order to own Sun Microsystems, has pushed itself into the middle of the scrum of technology heavyweights all jostling for the same corporate customers. The $7.4 billion deal, which gives Oracle a vast hardware business for the first time, pits it against Hewlett-Packard, IBM, Dell and Cisco Systems, all of which have made a flurry of acquisitions and alliances. Many of these moves broadened the companies products and services from their traditional specialties, like databases, computers or networking equipment. Each company wants to be able to claim to prospective customers that it, and it alone, has more of the parts to be an end-to-end service provider.

The cost isnt in buying the pieces, Lawrence J Ellison, chief executive of Oracle, said in a phone interview. The cost is in the labour of assembling them and making them work.

Ellison said that in the next few months, Oracle planned to lay off fewer than 2,000 people, while hiring more than 2,000 people in engineering, sales and other roles. He did not rule out that additional layoffs might occur later.

Oracles purchase of Sun, which European regulators approved last week after months of scrutiny, stands out as the most game-changing corporate technology play made during the economic downturn, according to industry analysts. Its the most significant deal of the decade, said Dan Olds, an analyst with Gabriel Consulting. Oracle has a shot here to change the rules of the industry and usher in a new era.

As analysts like Olds point out, the era is new only in relative terms. The corporate computing market began decades ago with IBM selling customers systems that included most of the hardware and software they would need in a single package. As time went on, a host of minicomputer makers rose to prominence with a similar strategy, in which they would build all of the crucial pieces of a large system, including its chips, main software and networking technology.

The older model of selling corporate systems was then disrupted by the rise of powerful, more standardised computers based on readily available chips from Intel and an innovative software market. Customers could suddenly choose the technology they preferred from a variety of suppliers and assemble those products in their own data centers.

Prices of hardware and software declined under this competitive pressure. Oracle, for one, wants to revert to the more traditional model.The company plans to offer customers databases, business software, servers, storage systems and networking equipment from one place. In addition, Oracle will do the hard engineering work to make sure all this technology works well together, Ellison said.

It is odd that the computer industry ships all these separate parts and expects customers to assemble them, Ellison said. You will now be buying this complete system, and dont have to hire IBM or someone else to assemble it for you.

While Oracle has long battled IBM in the database market, its push into computer hardware places the company in direct competition with longtime partners like HP and Dell.