Analysts see Oracle-Sun deal as storage 'game changer' |
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By Beth Pariseau, Senior News Writer
20 Apr 2009 | SearchStorage.com |
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Oracle Corp. has announced its intention to acquire Sun Microsystems Inc. in an all-cash transaction worth $9.50 per share of Sun stock, for a total net value of $5.6 billion when Sun's debts are factored in.
Executives on a conference call this morning said the intention is to build complete purpose-built hardware and software systems for running Oracle databases, a move that has storage industry analysts forecasting a potential sea change for the storage industry.
Sun's Java programming language and OpenSolaris operating system were the biggest drivers of the deal, according to remarks made by Oracle founder Larry Ellison during a conference call to discuss the merger Monday morning. However, both Ellison and Oracle president Charles Phillips said that systems and storage hardware are big parts of the plan for Oracle-Sun.
Phillips said Oracle's largest customers "are asking us to step into a broader role by delivering highly optimized specs from app to disk based on standards. The general feedback is that they wanted more than standard components—they want standardized deployments and configurations."
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Right now, it looks like Oracle is going to stay in the hardware game, meaning they're going to be competing with their biggest partners.
Brian Babineau
senior analyst, Enterprise Strategy Group
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Analysts see this trend taking hold in other areas of the IT market, especially with Cisco Systems Inc.'s recently announced Unified Computing System (UCS), which Cisco is pushing as a one-stop shop for servers as well as Ethernet and Fibre Channel (FC) networking.
"We've been here before—that was called the mainframe," said John Webster, principal advisor at Nashua, N.H.-based Illuminata Inc. "The network as the computer makes everyone in IT a computer engineer to keep it going. There may be a move back toward integration in order to get away from just keeping everything up and running."
The Oracle-Sun acquisition may cast vendors delivering one piece of the IT infrastructure in a new light, Webster said. "People who have been delivering separate pieces are now potential acquisition targets," he said. "You could put NetApp and Brocade on that list."
NetApp has been a close partner with Oracle for storage. Many enterprise admins run Oracle databases over NFS using NetApp systems, and more than a petabyte of NetApp systems have been deployed by Oracle internally. Meanwhile, NetApp remains locked with Sun in an intellectual-property battle over patents related to NetApp's Write Anywhere File Layout (WAFL) and Sun's Zettabyte File System (ZFS). EMC Corp. has also been a prominent partner with Oracle, and has long positioned its online transaction processing (OLTP) storage systems for use with Oracle applications.
In addition, Oracle execs acknowledged that the Exadata system, based on a hardware partnership with Hewlett-Packard (HP) Co., is similar to Sun's open storage products. Both use standard servers, commodity disks and InfiniBand interconnects.
"Right now, it looks like Oracle is going to stay in the hardware game, meaning they're going to be competing with their biggest partners," said Brian Babineau, senior analyst at Milford, Mass.-based Enterprise Strategy Group (ESG). "EMC and NetApp are going to have to work even harder to convince customers that an integrated application stack isn't the way to go."
Both Babineau and Illuminata's Webster predict that there will be further industry consolidation this year in the wake of this deal. "This will rekindle rumors about [an acquisition of] NetApp," Babineau said. "It will also rekindle talk around the Cisco/EMC relationship. It's a game changer for the storage industry."
While OpenSolaris, ZFS and Sun's disk-based open storage products have been directly mentioned by Oracle, the tape-based business Sun acquired with StorageTek has yet to be specifically addressed. "There's a good chance they could keep it and run it," said Babineau, though a spinoff is always a possibility. Oracle's Phillips mentioned archiving as part of Oracle's storage vision on the conference call, and Sun has positioned tape for that space.
It remains to be seen how the deal will affect Pillar Data Systems, the storage startup that Ellison has funded with $350 million through his Tako Ventures investment company. Earlier this month, The 451Group analyst firm issued a report that said Ellison recently wrote in a note to Pillar CEO Mike Workman that he remains 100% committed to the long-term success of Pillar. Now, Oracle has a hardware company that competes with Pillar.
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