Big Tin

Big tin: IT infrastructure used by organisations to run their businesses. And other stuff too when I feel like it…

Oracle buys Sun — but who really wins?

The big news this week this is undoubtedly the $7.4 billion purchase of the troubled server company Sun Microsystems by database specialist Oracle. But, given the very different nature of the two companies, will it work?

Well-known in the industry for being the favourite of developers and geeks, and among its customers for its high-powered, reliable but expensive systems, Sun has nonetheless suffered financially since the implosion of the dotcom bubble. Its accounts have bled red for years, and selling the company seems for eons — that’s eons in IT years — to have been the only way out.

Just two weeks ago, IBM made overtures to buy the company. This author among others could see that there would be some synergies, although I struggled to see how Big Blue would swallow Sun’s server range, given that it has a well-established and rational product portfolio already. IBM and Sun would have fitted together mainly on the software side, where the acquisition of Solaris, a major platform in the database world, along with Java and many open source technologies including OpenOffice, would have sat comfortably alongside IBM’s espousal of open source, and its conversion from hardware to software and services company.

It wasn’t to be. Sun demanded too much of IBM — more here — and the deal fell through. We wondered at the time how Sun could have let it happen, and accused the Silicon Valley stalwart of greed and complacency.

What we didn’t know was that it had another suitor in the wings, one willing to pay Sun’s pretty substantial asking price.

Early post-purchase signs are good. Most analysts and observers see more positives than negatives emerging from the deal. Oracle is a software company first and foremost, while Sun’s revenues stem mostly from hardware.

What’s more, Sun’s Solaris is a major platform for Oracle’s eponymous database, which means that Oracle can now offer the whole stack, from raw iron upwards, and so is in a better position to offer more tightly integrated solutions. As the company’s acquisition statement said: “Oracle will be the only company that can engineer an integrated system — applications to disk — where all the pieces fit and work together so customers do not have to do it themselves”.

Some systems integrators may suffer as a result, but that’ll be some way down the line, after two or three product refresh cycles.

The deal has even got some of the opposition thinking. As Colin Barker reports from an HP product launch in Berlin (which I was unable to make, sadly): “HP executives thought that the news was interesting and it was not difficult to see their internal calculators trying to work out any options the move would give them.”

So far so fitted.

But big questions remain to be answered. Sun has always been a fairly open company, and has always seen itself and wanted to be seen as part of a wider community. When open source came along, Sun gradually adopted it and, with no little external persuasion it seemed at the time, even made some of its own, expensively developed technology open source.

In complete contrast, Oracle has rarely if ever done that — apart perhaps from its development of its own version of Red Hat Linux, which the market has largely ignored. Oracle’s proprietary approach and eagerness to squeeze every last dollar out of its large enterprise customers is the stuff of legend.

This is unlikely to change, especially now that it can lock down those customers to a tightly integrated hardware platform. The reactions of those customers, of the competition, many of whom are in alliances with either or both the parties to the acquisition, and of the channel remain to be seen.

There will be layoffs too, given the economic situation, and the more obvious lack of need for duplicated sales, marketing or HR departments, for example. One analyst is reported to have predicted up to 10,000 job losses. I would expect the culture shock to squeeze quite a few through the out door.

But if you’re a customer, you might prefer not be locked in. If you’re a hardware partner of Oracle’s, you’re likely to be re-thinking that deal, big time. HP is in that boat, given that it’s co-developed servers for Oracle, in the database company’s first venture into hardware, back in 2008. And if you either work for Sun or are one of the developer community in Sun’s orbit, you might well find yourself wondering where to go next, whether voluntarily or not.

My take is that most customers will stay put. It’s not the time to start launching into expensive new IT roll-outs. That’s not to say that those with an aversion to single-supplier deals won’t bail as soon as possible.

However, the pressure on the competition in the current climate is likely to result in more mergers and acquisitions, and a jungle populated by fewer but bigger beasts.

But who and which? Here are some questions: will IBM swallow EMC? Will Cisco buy Brocade? And could Microsoft finally buy Yahoo!? And how many more yachts will this deal enable Oracle CEO Larry Ellison to buy?

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Filed under: mergers & acquisitions, operating systems, Servers, , , , , , ,

Where does the Sun-IBM deal failure leave Sun?

So Sun Microsystems turned down IBM’s offer to buy it — even though Big Blue’s $7 billion buy-out bid was twice the valuation of the troubled Silicon Valley stalwart.

We read on Bloomberg that the sticking point was a clause in the contracts of top Sun execs. The news service reports that: “chief executive officer Jonathan Schwartz and chairman Scott McNealy have contracts that mean they would receive three times their annual pay, including salary and bonus, should Sun be acquired.”

IBM reportedly didn’t think too much of that stipulation and would not honour it — even though its acquisition of the fourth-placed server vendor would have boosted its position against number one vendor HP.

We also read that “Sun’s board contended IBM wanted too much control over Sun’s projects and employees before the deal closed”, which is hardly surprising: coughing up $7 billion has a way of concentrating the mind.

And especially when it appears that some super-rich employees wanted to grow even richer than they already are. Top Sun execs get paid in millions of dollars: Bloomberg reports that Schwartz’s salary was $1 million last year and his target bonus was twice that amount. And company founder McNealy was awarded $6.45 million in compensation last year, including $1 million in cash for his “service as an employee of Sun”.

But in this day and age, exactly how much money does one already super-rich individual truly need?

There’s another factor. Even before the recession, Sun consistently failed to show a profit so IBM would be bonkers not to want to manage Sun closely. And Sun looks to be heading for its biggest loss since 2003.

Following its rejection of IBM, Sun’s share price dipped 23 percent, its biggest fall since 2002, according to Bloomberg.

So what are we to learn from this? Chatter among techies in the industry demonstrates tremendous loyalty to Sun and its technology. However, a company selling semi-proprietary kit — yes, I know that Solaris is now open, and that it uses Intel processors and so on, but that’s not where the bulk of its sales are — was always going to struggle now that hardware is commoditised and standardised.

Analysts agree.

“Sun can survive as an independent company, but the longer the recession goes on, the more likely it is the value of the franchise begins to fade,” said one.

“Sun made a horrible mistake. Wall Street analysts probably optimistically expect their revenue to decrease year-over-year for the next several years — they should have just taken that money and ran,” said another.

Is this the beginning of the end for Sun? Industry observers — including this one — have called this before and been wrong. Largely down to the company’s huge cash cache, Sun has continued to trade even as its accounts bleed red.

What’s different this time is that Sun’s top execs seem to have forgotten that we’re in the middle of a recession. It might be because Silicon Valley has its own mental micro-climate. I was there a couple of months back, talking to venture capitalists and heads of startups looking for funding, and the untrammelled optimism was palpable: I almost started sweeping it up off the floor.

But in the real world, there’s near-universal anger and disappointment at the shenanigans of the stupendously well-paid at the heads of companies. Keen to be seen as corporately and financially responsible, IBM is likely to have been sensitive to the appearance of funding what looks like plain greed.

Neither of the two parties has commented on their falling out. But if Sun is to survive, you’d have to hope that hubris doesn’t get in the way of deals with any future suitors.

If there are any.

Filed under: mergers & acquisitions, Servers, , , , ,

New HP servers take battle to Cisco

HP has today launched a swathe of servers in multiple form factors — rack, blade and tower — driven by Intel’s latest processor architecture, codenamed Nehalem.

But there’s much more to it than that.

Time was when server companies, especially those such as HP, which analysts say has the biggest server market share, would boast and blag about how theirs were the biggest and fastest beasts in the jungle.

No longer. Instead, HP put heavy emphasis on its management capabilities. That’s a shot fired across the bows of network vendor Cisco, which just two weeks ago unveiled a new unified computing initiative, at whose core is a scheme to manage and automate the movement of virtual machines and applications across servers inside data centres. Oh yes, there’s a server in there too — a first for fast-diversifying Cisco.

But this is a sidetrack: back to HP’s launch of the ProLiant G6. Performance was mentioned once in the press release’s opening paragraph — they’re twice as quick, apparently — but when he spoke to me, European server VP Christian Keller focused almost entirely on manageability, and performance per watt.

“We have 32 senders that give health information about temperatures and hotspots. Unlike our competitors, we don’t just control all six fans together — we can control them separately using advanced algorithms. These are based on computational fluid dynamics and are based in a chip, so it works even if the OS is changing — for example during virtualisation moves,” he said.

Keller went on to talk about how the servers’ power draw can be capped, again using hardware-based algorithms, which means that a server that’s been over-specified for the purposes of future-proofing won’t draw more power than it needs.

The result, Keller went on, is that “you can use the data centre better and pack more servers into the same space.” The bottom line is that the organisation reaps big total cost of ownership savings, he reckoned, although with finance very tight, he said that quick payback was at the top of mind of his customers.

“Customers are looking for faster payback today due to recession,” he said. “With HP, you need fewer servers to do the same amount of work and payback is achieved in around 12 months.” And there’s a bunch of slideware to back up his claims. You can get more on the products here.

Management software
HP’s keen to make more of its data centre management software — during a recent conversation, one HP exec said he reckoned the company had indulged in stealth marketing of its software portfolio.

And it’s true that HP’s new raft of software, much of it launched over six months ago and based on Systems Insight Manager, has barely been mentioned outside conversations with HP’s customers. It covers a wide range of functionality, enabling data centre managers to manage partitions within and across blades, which can be in the same chassis or in separate chassis — depending on what you want to do.

I saw a demo of the system and it was impressive. One of the core modules is the Capacity Advisor, which allows what-if planning so you can size your hardware requirements. It includes trending out to the future – which was a features on HP’s HP/UX platform but is now on x86. It not only allows the manager to size systems both for current and future use, it automatically checks how well the sizing operation matches reality.

Virtualisation Manager adds a view of all resources and virtual machines, and can display application resource utilisation inside VMs, while Global Workload Manager allows you to change priorities depending on which application is the most critical. So backup gets resources when the payroll cheque run is finished, for example. There’s lots more to it, so you can find out more here.

This isn’t intended to be a serious review of HP’s system management software — I didn’t spend nearly enough time with it for that. However, amid the noise surrounding VMware and Microsoft, and a host of third parties vying for position as top dog in the data centre management space, and together with the brouhaha surrounding Cisco’s recent launch, HP has quietly got on with developing hat looks like a seriously useful suite of software.

Apart from a press release six months ago, the company just hasn’t told many people about it.

Filed under: Product launch, Servers, Systems management, , , , , , , , , ,

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