Eye on Oracle

Jun 9 2010   2:23PM GMT

Sun Microsystems: Oracle’s biggest science experiment?

Mark Fontecchio Mark Fontecchio Profile: Mark Fontecchio

Eric Guyer with Forsythe Solutions Group writes about Oracle’s biggest science experiment to date — the acquisition of Sun Microsystems. And he doesn’t consider that to be a good thing for Oracle.

“First of all, hardware maintenance isn’t as lucrative or perpetual, so the economics will break Oracle’s profitability model,” he wrote. “On the front end of build and sell, Oracle will have to out-Dell Dell—the industry leader in building commodity servers—by multiples upon multiples to consider any hardware line successful in comparison to traditional software.”

Considering Oracle’s push into Sparc-based hardware rather than x86 commodity servers, I don’t see the company being able to out-Dell Dell at any point. Rather, it seems as if Oracle will pare down Sun to profitability and push high-margin hardware such as Exadata and other big Sparc boxes.

Guyer says that Oracle’s profit model for software includes online downloads and trials, followed by pricey charges when key features go into production. As Guyer notes, hardware cannot be downloaded and so Oracle must adjust its sales model to accommodate the Sun acquisition.

Back when Sun was on its own, it offered a plethora of “try and buy” offers where customers could play with the hardware for 60-90 days to see if they liked it. If they did, they bought it. If not, they returned it. Sun paid shipping costs both ways. That program ended Dec. 18, according to the Sun Try and Buy website.

“The not-so-funny joke over the last several months has been that Oracle offers a buy-and-try on Exadata, direct-only to customers, including a strict no-return policy,” Guyer wrote. “Oracle claims that demand has outpaced production, resulting in a $1B pipeline and inability to ship units without signed purchase orders.”

We’ll see how that works. Is there anyone out there who has bought hardware from Oracle and wants to tell us about it? Comment here or drop me a line.

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