Oracle Buys Sun: What Will Happen Next?

SANTA CLARA, Calif., April 20, 2009. Sun Microsystems (NASDAQ: JAVA) and Oracle Corporation (NASDAQ: ORCL) announced today they have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash. The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt. The price represents a 42 percent premium to Sun’s Friday closing stock price of $6.69. This acquisition came after Sun broke negotiations with IBM, which was offering $9.40 per share.

Sun Press release said “There are substantial long-term strategic customer advantages to Oracle owning two key Sun software assets: Java and Solaris.” I think that this last sentence will reflect the main point of this purchase, as far as software developers are concerned. In his quest for getting a more important share of the software infrastructure of companies, Oracle acquires mainly a programming expertise and operating system that should complement its application and databases solutions. The hardware part should also allow Oracle to offer a complete optimized hardware and software solution to its customers, even if, due to Sun smaller market share, Oracle has to be friendly with its other hardware partners like HP or Dell. Acquiring Sun, Oracle also increase its expertise in the Java middleware area, after the acquisition last year of BEA Systems.

The other fact which is contained in Sun press release sentence, or I should say which is omitted, is MySQL. Sun acquired MySQL in January 2008, as a way to boost its software offer. MySQL has been for a long time an important issue for Oracle, as it was a big competitor in the lower end of the market for databases. With this acquisition, Oracle has the possibility of “quietly” killing the MySQL development process and offer the current MySQL paying customer an opportunity to migrate towards its own database product. I don’t see Oracle maintaining two database product lines, especially if one is mainly “given away” for free. Even if existing Oracle customers may not be tempted by MySQL, this new database was always in consideration for startups. There were also some companies that tried to build upon MySQL the missing tools to bring it close to the power of Oracle products.

We expect a similar fate, silent slow death through lower financial support, for mainly of the other Sun’s technologies: NetBeans, GlassFish, JavaFX or OpenOffice. Oracle always want to get the most of the financial aspect of acquisitions and spending money on open source projects and technology that has low immediate return on investment is not something that it would consider, unless it could be used as a tactical weapon against some of its competitors, like Microsoft or SAP for instance.

Sun Press Release
http://www.sun.com/third-party/global/oracle/index.jsp

Open Source Software Turned Industrial but Perceived Quality Don’t Change

pen source development tools like MySQL, Eclipse, PHP or JBoss are now adopted by many software development organizations. Our last poll examined how the quality of open source tools is perceived against their commercial competitors. We conducted a similar poll twice in the past and it is interesting to compare the results.

Open source versus commercial tools quality
Same quality: 31%
There is no easy answer to this question: 25%
Superior in quality: 21%
Inferior in quality: 12%
I do not use open source tools: 6%
I do not use commercial tools: 3%

Participants: 913

Source: Methods & Tools

We can see that the results have not changed significantly compared to the previous polls. Even if the number of participants thinking that quality is similar has decreased slightly, a majority still judges that open source software development tools is as good or better than commercial products.

Open source is now mostly an industrial activity

The difficulty to answer can be explained by the increase of the diversity of management type for open source projects. We have seen a noticeable growth of the industrialization of major projects. This has been realized by different means: acquisition of open source companies (MySQL by Sun), industrially backed foundations (Eclipse, Apache) or funding by venture capital (SpringSource, Zend). Commercial involvement has also been noticeable in providing support to open source with hosted communities or forges (codeplex.com, code.google.com). Initiatives like the Google summer of code (code.google.com/soc/) provide also new resources to open source projects.

Money is certainly not a guarantee for higher quality, but it allows open source projects to have better development conditions. They can also do more promotion that normally increase their user base and therefore the available feedback that should feed product improvement. We are also at a time where the “natural selection” process has reduced the number of active projects in mature areas. Looking at the projects hosted by sourceforge.net or tigris.org, you can see that many tools have not evolved recently. I don’t see a lot of new initiatives to build open source web servers or databases. In other areas, like testing, new projects are more trying to build on existing solutions or porting them to a new language.

Second generation open source projects

Some open source sectors, like the web user interface, are however still trying to reach the same maturity level than IDE or databases. Many benefit from the experience of the first-generation projects. Companies to exploit the commercial side of open source are created from the start of the project. They attract venture capital and are managed by experienced open source executives, like Appcelerator that attracted a lot of former JBoss core team members. This trend in turn influences commercial players, as it can be seen with the initiative from Adobe to put its Flex code in the open source domain with the release of Flex 3. The initial assumption that open source software was created by a group of individuals working on their spare time outside a commercial structure is now less and less true today, especially for the main tools used by developers.

Sun is Buying MySQL

It should be something related to the sales period as the same day that Oracle scoop BEA Systems, Sun Microsystems announced it has entered into a definitive agreement to acquire MySQL AB for approximately $1 billion.

MySQL was forecasted to set an IPO this year, but it seems that with the difficult conditions of the stock market its initial investors have chosen the easy solution to cash their money by letting Sun acquire the company.

For Sun, who recently changed its NASDAQ stock ticker from SUN to JAVA, it is a confirmation that the new strategic direction is in software and services. This move is therefore an important step to transform itself more in a service oriented company. With MySQL, Sun acquires a fast-growing company that has already a dual open source-commercial approach. Its estimated 2007 revenues were around $70 million. It is also a quick and good ticket to enter the database market already occupied by its competitors (Microsoft, Oracle and IBM). We suppose that Sun will not touch a lot to the existing MySQL organization. Being backed by a bigger company will bring an increased credibility and a better sales channel. Sun could also provide additional resources to improve its product so that it will become a more fierce competitor against Oracle.

The acquisition could also help Sun to propose its own alternative to the open source Linux/Apache/MySQL/PHP (LAMP) architecture. As it put its Solaris operating system in open source last year, it could propose a Solaris/Apache/MySQL/Java (SAMJ) pack that could be optimized. This could be a real alternative to the Windows ecosystem that is backed by a “old” company, thus allowing medium-size companies to have the impression to make a safer transition than with a pack of dispersed open source projects.

This move also changes the landscape for the other companies operating in the open source database area, like PostgreSQL and Ingres. However it is also a financial validation of the open source commercial model and some companies could end being the target of a bigger fish in the future. I will not be surprised if companies like Red Hat, HP… or Yahoo! will make some acquisitions in the sector in a near future.

MySQL Waits for an IPO

The "M" company of the LAMP acronym has increased its revenues to about $ 50 million in 2006 up from $34 million in 2005. According to a speech given by CEO Marten Mickos at the recent MySQL conference, the company is also close to breakeven, even if this is not a specific goal. MySQL earns money by selling supports for its database product.

MySQL is the dominant player of the open source database market and its strength has forced Microsoft and Oracle to offer free basic versions of their own databases. MySQL has been a target for Oracle when major editors were looking to acquire open source companies like JBoss, now part of Red Hat. Oracle didn't get MySQL but acquired InnoDB, the editor of one of the transactional engine behind MySQL. To justify for the IPO, MySQL's CEO declared that some customers will deal more easily with a public company with open accounting. This could also provide funds to acquire other companies. Both MySQL and Zend (the company behind PHP) are de facto managing the products that are the foundations of many Web sites. I think this will be the best interest of Web developers that these companies stay independent. In this case, an IPO could make it easier that they would be acquired by a competitor, depending on the attitude of the new shareholders.