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Sun Hardware's Value Proposition for Oracle Analysts Expect Oracle to Sell More than Just Sun Software July 15, 2010, Volume 149, Issue 2
In his breezily titled piece "How Oracle has made Sun rise again" silicon.com writer Tim Ferguson observes that, a mere six months from Oracle's acquisition of Sun, the latter company has turned the profit and loss corner for the first time in more than a year. "Oracle," he writes, "appears to be breathing new life into the company." During the first full quarter with Sun under the Oracle umbrella, Ferguson continues, Sun's hardware business added some $1.2bn in revenue to the Oracle ledgers, which amounted to $400m in profits. Of course, it was not hardware alone that Oracle acquired from Sun but Java programming language, the Solaris open source OS, and MySQL, all sure to make income contributions of their own in the coming market year. Oracle president Safra Catz says confidently that Oracle expects Sun to contribute some $1.5bn in operating income by the end of FY2011, according to Ferguson. Given Oracle CEO Larry Ellison's plans to increase the Sun sales force by more than a factor of two, Ferguson infers, he clearly has big plans for enlarging market share for Sun hardware. Ferguson cites TechMarketView analyst Philip Carnelly's comment that, "Speculation that Oracle would soon hive off the hardware business because it only wanted Sun for its Java software was clearly way off the beam." Carnelly went on to say that Oracle's results represent "a pretty spectacular turnaround given Sun's massive losses in the period before its acquisition," Ferguson reports. While Oracle might initially have sought Sun for the market potential in Java programming language, TBR analyst Jessica Breen told Ferguson that, "I think Oracle got into the hardware business hesitantly, but once they realised that hardware could really support a strong value proposition, it made it worthwhile to keep that portion of Sun's business." Ferguson reports that Breen observed further that Oracle's strategy of eliminating such commodity technology as the x86 server from the Sun product family and to focus instead on SPARC servers and Sun Fire servers reveals an intention to make the hardware business more profitable. The comments of Ronan Miles, president of the UK Oracle User Group, reflect the degree to which the industry has been surprised by Oracle's aggressive approach to the Sun organization and by its positive results. "I think it is fair to say that Oracle has pulled a rabbit out of the hat on this one and surprised us all," Miles said. Miles said he expects to see further products like the Exadata Database Machine, developed jointly by Sun and Oracle even before the acquisition was a reality. Ferguson writes that such hardware/software combinations should strengthen Oracle's position as a vendor to vertical industries of solutions developed specifically for their industries. Breen predicts that as Oracle becomes increasingly familiar with the Sun product line it will discover and capitalize on efficiencies that will contribute further to the bottom line. Carnelly of TechMarketView gets the final word in Ferguson's piece, saying, "If [Oracle] can maintain the current cost control and grow revenues at the same margins, it'll get increased economies of scale so things will get even better." More Information
Larry Ellison on the Acquisition of Sun Microsystems
Sun Partner Frontline Discusses Shift to Oracle Practice
[...read more...]
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Oracle appears to be breathing new life into [Sun] 
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Sun Hardware's Value Proposition for Oracle
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