Oracle-Sun deal

The EU grants Oracle another six days to prepare its case on MySQL

The European Union (EU) has not been making Oracle’s acquisition of Sun an easy one, putting the “acquisition machine” in quite a different situation than it’s used to.

The deal, which has already been approved by the U.S. Department of Justice, came under scrutiny by the EU in September, when European regulators expressed concern over many parts of the takeover, especially Oracle’s pending ownership of Sun’s MySQL open source database.

Then, earlier this month, the European Commission (EC) released a Formal Statement of Objections against the deal.  The EC said that Oracle has not yet shown evidence that the deal does not violate European laws regulating unfair competition. Oracle responded with its own statement, which included that the acquisition “does not threaten to reduce competition in the slightest, including the database market,” and the EC’s concerns about MySQL show that they do not understand the idea of open source.

Now, however, it looks like European regulators are giving Oracle something they want — or are they?

Oracle has asked for more time to develop its argument against the EC’s concerns, and the EC announced today that it would extend the deadline of its antitrust review of the deal from Jan. 19 to Jan. 27.

But is an extra six working days really enough time?

That remains to be seen, but it does look like European regulators aren’t the only ones working against Oracle. For example, Florian Mueller, coordinating opposition to Oracle’s purchase of Sun Microsystems and MySQL, sent a note today applauding the news that the EU granted Oracle a delay - but for a different reason than Oracle may have.

“If the EU’s objections were baseless, Oracle wouldn’t need more time now to develop its arguments. The best way Oracle can make use of this extra week is to think really hard about selling MySQL to a suitable third party,” he wrote.

Is there any chance that the EU will approve the deal with so many objections? We’ll now have to wait an extra six days to find out.

The IOUG takes a swipe at the European Commission

As tension builds in the standoff between Oracle and the European Commission (EC) over Oracle’s proposed ownership of MySQL, Redwood Shores has picked up the support of the Independent Oracle Users Group (IOUG).

This is hardly a stunning development, although Chairman Ellison may find some comfort in knowing he has the backing of 20,000 database administrators, developers, architects, technical managers as he continues on his crusade.

Late last week the IOUG released a letter opposing the EC’s Statement of Objection, in which the EC made clear - again — what would happen to European users’ freedom of choice if Oracle controlled both its own dominant proprietary database and MySQL.

In the IOUG letter president Ian Abramson tried to make the case that by owning MySQL, Oracle would actually increase competition in the database market instead of limiting it. As evidence he pointed to Oracle’s staunch support of open standards along with how it has treated several open source technologies it has acquired over the past decade.

“Consistently, Oracle has demonstrated its intention to define standard approaches that are open to all, and the acquisition of MySQL is expected to be no different,” Abramson wrote. “Oracle has shown it is a company that supports open standards. We anticipate that Oracle will continue to foster innovation and openness with MySQL following the acquisition and not hinder competition.”

Underlining his point about how well Oracle is capable of working and playing well with others in the open source world, he cites several acquisitions the company has made and how well those technologies have done since including TimesTen, Berkeley DB and Hyperion’s Essbase.

Abramson added that should Oracle decide to “deviate” from this pattern of behavior of the way it has treated the technologies it has acquired, it is his belief the market would be quick to drive a whole new set of viable competitors into the open source world.

In the latest go round involving the EC’s Statement Of Objection to the Oracle-Sun deal, Ellison and the EC’s Neelie Kroes slapped each other around pretty good. Ellison gave the EC a backhander saying its objections were based on a “profound misunderstanding of how open source worked, and Kroes countered with a sharp left hook labeling Ellison’s criticism as “facile and superficial.”

Why is this battle over a free piece of software, which represents such a small part of the overall $7.4 billion deal growing increasingly contentious? Some good answers were given in a New York Times story that points out this case is helping surface the very different views of open source software.

First open source software is much more economically important to Europeans than it is to Americans. In the story Michael Cusumano, a professor at MIT’s Sloan School of Management says the trans-Atlantic “megawar” makes sense in that “the Europeans come to the defense of open-source companies because the big proprietary companies are nearly all American.”

The story goes on to say European governments have looked at open source software as a “potential tool of economic development and independence.” For instance, according to the story, several major European countries actively encourage local and central governments to consider products like MySQL and Linux over proprietary platform such as Oracle databases and Microsoft’s Windows.

The EC is clearly considering what this decision might mean to the overall health of some European economies. It appears to be a much more important consideration to the EC than it was to the U.S. Department of Justice who approved the deal with not too much muss and fuss months ago.

So this battle could serve to resolve a much larger issue than what havoc Oracle might wreak among its competitors with a free database. It continues to be a crime that Sun employees lose their jobs as these two haggle over what this solution should be? If it goes badly for Oracle at the scheduled Nov. 25 meeting with the EC, and the latter formally blocks the deal by the Jan. 19 deadline, and if Oracle decides to take the EC through a protracted trial, there won’t enough of Sun left to make this worth Oracle’s while.

Pressure builds for Oracle to sell MySQL

It seems like some people just don’t want Oracle to own MySQL.

Right on the heels of Oracle chairman Larry Ellison’s pledge to aggressively support Sun’s MySQL database at OpenWorld last week, Michael “Monty” Widenius, MySQL’s creator says Oracle should sell the open source database to a third party thereby resolving the antitrust concerns of the European Union (EU).

The EU’s objections are focused on Oracle, the leader in proprietary databases, gaining possession of MySQL, the leading open source database, and the competitive ramifications that sort of dominance will have on European markets.

In his blog Widenius wrote that MySQL needs a different home other than Oracle “where there would be no conflicts of interest concerning how, or if, MySQL should be developed further.”

Both Ellison and Sun co-founder Scott McNealy in their OpenWorld keynotes pointed to examples of Oracle’s track record when it comes to owning open source products, most notably the Sleepycat database. McNealy said he believes Ellison will carry through on his promise to bring MySQL greater success adding that the product represents no threat to Oracle’s flagship database and that it is a natural competitor to and an offering from a common enemy - Microsoft.

“MySQL is the leading open source, low-end database. Larry says it will not compete with Oracle or DB2 but with Microsoft so he has every reason to want it to succeed,” McNealy said.

Even Widenius’ former partner and co-founder of MySQL, Marten Mickos has contacted Nellie Kroes, the EU’s Competition Commissioner, advising her to approve the acquisition in the face of Sun’s dwindling market share and financial fortunes.

Ellison last month said Sun is losing some $100 million a month, and if the EU’s investigation goes all the way to the January 19 deadline, that could mean another $300 million in losses, along with God knows how many more points of lost market share to IBM and HP in the server hardware business. As I have said before, I don’t understand why the EU doesn’t understand there is little danger to limiting user choice or in Oracle trying to control pricing by approving the deal. I mean, there are no pricing issues — MySQL is free.

Just late yesterday Sun said it planned to cut 3,000 jobs over the next year, although some of those jobs could be related to redundancies with Oracle personnel as the company readies itself for the expected merger. Still, some of those layoffs have to be related to Sun’s poor performance since early this year.

The rub here is finding a “suitable” third party to take over ownership of MySQL. It certainly can’t be sold to IBM, SAP, Hewlett-Packard or any other major competitor of either Oracle or Sun without the strong objections of Mr. Ellison and certain government agencies.

Microsoft? They should be interested in the idea, since Oracle could well use MySQL to compete against SQL Server in the lower end markets. They could take a weapon out of Larry’s hands. But I doubt they are ready for such an aggressive move into the open source world.

Leading open source companies Red Hat and Novell would give serious consideration to buying it, but will they ever get the chance? Highly unlikely, but it’s an outside possibility.

Widenius, by the way, left MySQL a while ago to form his own company, Monty Program AB which is working on a branch of MySQL called MariaDB. I assume he doesn’t have any interest in marshaling an effort to take his old product back.

No, (and I can barely believe I am saying this) the best option here for everyone concerned is that the EU show some faith and trust that Oracle will do what it says it will do. If Oracle doesn’t follow through and abuses its monopoly position in the database market, Oracle will be the biggest loser because customers and their dollars will migrate to a more trustworthy competitor.

Does Larry care about Oracle customers?

When it comes to his company, Oracle CEO Larry Ellison is clearly ‘in it to win it’ - but for whom?

One could justifiably assume it’s for his customers who spend millions on Oracle’s products and services, but as Information Week’s Bob Evans points out in his Open Letter to Oracle CEO Larry Ellison, customers (as individuals rather than numbers) often seem to be low on Larry’s list of priorities.

What have we, or haven’t we, heard from Ellison lately to demonstrate this claim?

First of all, the pending acquisition of Sun Microsystems has recently been a topic of great interest for both Oracle and Sun customers.  While Oracle understandably cannot discuss the deal in great detail since it has not yet been approved by the EU, customers have been given little information or assurance from Oracle. Last month, many Sun customers and partners were concerned about how they have heard nothing about the Sun deal since it was announced.

When Ellison did decide to address the public about the acquisition, he used it more as a chance to speak to his competition — IBM - rather than his customers.  In this recent ad in the Wall Street Journal, Ellison does address Sun customers, with vague promises that Oracle will spend “more money” on SPARC and Solaris.  But Ellison’s direct message at the bottom of that ad was aimed squarely at IBM - “We’re in it to win it. IBM, we’re looking forward to competing with you in the hardware business.”

As Evans discusses, this lack of detail from Ellison is not unusual.  Evans writes about Ellison’s comments during his recent Q&A at the Churchill Club, and how Ellison talked at great lengths about his relationships with competitors IBM and HP but said little about his customers:

“It just seemed a bit odd-actually, maybe more than a bit-to see these sweeping and penetrating and candid comments from one of the world’s top executives with so little mention of the role that customers are playing in your thinking,” Evans wrote.

Evans also pointed out that this gives the impression that Oracle and Ellison are interested more in technological features and customer adoption of a product rather than customer value.  What happens after a customer adopts a product? Does Oracle care about that?

Maybe - but it seems to care more about its reputation and going after the competition. So much so that apparently Oracle will make unsubstantiated claims against IBM.  Oracle was reprimanded and fined yesterday by the Transaction Processing Performance Council (TPC).  In a letter to Oracle and an official statement, the TPC explained that the software giant ran an ad in the Wall Street Journal and The Economist claiming that ‘Oracle + Sun is Faster’ than IBM. Oracle based its claims on benchmark TPC results that it promised to show Oct. 14 at Oracle OpenWorld.  The problem was that the Oracle did not yet have a TPC result at the time it ran the ad.

But are we expecting too much out of Ellison? Evans doesn’t think so, telling Ellison to “don’t ever underestimate the power of your words and your perspectives on your CIO customers.”  Larry should also remember who ultimately pays his salary and allows him to build $200 million yachts. Oh that’s right, his users.

What do you think? Should the multi-billionaire Oracle CEO be responsible for addressing the needs of his customers in greater detail? Do you feel like Oracle cares enough about your needs? What would you like to hear more of from Ellison?

Ellison hopes the EU won’t Sunset his hardware business

Speaking at a dinner hosted by a non-profit group in San Jose last night, Oracle chairman Larry Ellison confirmed what we wrote earlier this month: The European Union’s investigation into the Oracle-Sun deal could slowly kill Sun’s competitive chances.

Well, maybe not so slowly. Ellison said Sun is losing some $100 million a month. This news comes less than a month after Sun reported a loss of $147 million for the August quarter.  Things are clearly getting worse.

Interviewed on stage, perhaps fittingly, by ex-Sun executive Ed Zander, Ellison said the longer the EU’s approval process takes, “the more money Sun is going to lose, and that’s not good for anybody. We want to get this (acquisition) done to save as many jobs as we can.”

Ellison did express confidence the EU will approve the deal, but obviously would like to see that approval way before the January 19, 2010 deadline. If indeed it takes that long, Oracle’s integrated hardware-software strategies will have to come from way back in the pack to catch IBM and Hewlett-Packard, both of whom have been successfully marauding Sun’s user base.

Nonetheless, Ellison said he is still intent on competing hard against IBM and HP, adding he has “no interest in the hardware business,” per se but has a “deep interest in the systems business.” This means Oracle will focus on very high performance systems, such as the Exadata 2 system it jointly rolled out with Sun last week, and not commodity level boxes.

Continuing on his roll, Ellison said he had no plans to sell off Sun’s popular open source database, MySQL, despite some of the reservations expressed by the EU. Earlier this month EU officials said Oracle having control over the leading proprietary database and the leading open source database could end up significantly limiting users’ choices in the database market.

Ellison shot back last night saying Oracle’s flagship database doesn’t compete with MySQL, asserting each product is sold to very different users. Oracle’s product is aimed at large corporations for mission critical applications while MySQL is for programmers who can download it for free and generally use it for Web-based applications. It is good to see Larry take a swing back at the EU for such lunacy.

And in another case of Larry being Larry, he couldn’t help himself from taking another swing at cloud computing. I thought he got past this, but he still hasn’t had his fill. Asked what sort of threat cloud computing presented to Oracle’s business, Ellison said there was nothing new about the idea, “that is was just water vapor, just a computer connected to a network.”

Come on now Larry, we know its semantics but look at what your competitors can do with just the right words and a huge marketing campaign.

In a somewhat surprising piece of advice to aspiring entrepreneurs in the audience, Ellison said they should think about pouring their money and energies into biotech and not IT. So one of the richest guys in the world, who made his fortune from IT, doesn’t think it offers the next generation any growth opportunities?

Oracle, Sun roll out Exadata 2

Even as the European Union continues to dig into the validity of Oracle’s $7.4 billion proposed acquisition of Sun Microsystems, Oracle chairman Larry Ellison showed off the first product jointly developed by the two companies, confidently calling it “the fastest machine ever built for data processing.”

In a presentation, where he was joined on stage by John Fowler, a senior executive with Sun, Ellison said the Exadata Version 2, which marries Oracle’s database software with Sun’s FlashFire technology, is twice as fast as the original, and is significantly faster than the fastest machine made by archrival IBM.

“We are the fastest in the world for data warehousing and by far the fastest for online transaction processing, because we have optimized random I/O. We can do over 1 million random I/O instructions per second, which is significantly faster than anything IBM has,” Ellison said.

Ellison remarks were counterpunches clearly aimed at both IBM and Hewlett-Packard Co., both of which have mounted aggressive campaigns over the past few months hoping to steal away Sun customers while the Oracle-Sun deal met final approval.

Just in the past couple of weeks IBM says it has won over 250 customers in the first half of this year, claiming that is growing more rapidly since Oracle announced its intention to buy Sun on April 20.

Ellison said two other advantages of Exadata 2 are that all of its basic components are fault tolerant, and that large IT shops can scale its capabilities in cloud computing environments.

“People talk about cloud computing where if you need capacity you can just allocate it. Well that’s a nice concept if your database systems can add capacity in that environment. Ours’ is the only one today that can do that,” Ellison said.

Exadata Version 2 is available in four models including a full rack consisting of eight database servers and 14 storage servers, a half-rack with four database servers and seven storage servers, a quarter-rack with two database servers and three storage servers and a basic system with1 database server and one storage server.

All four configurations are available immediately.

We’ll have more coverage of Exadata 2 later on Wednesday.

The EU fiddles while Sun burns

The European Union has always taken a tough stance against large American companies who look like they are on the verge of abusing their monopolistic positions. Oftentimes it has been tougher on such American companies than our own Department of Justice.

But the EU’s latest objection over the Oracle-Sun deal has little to do with being a watch dog ensuring fair competition and more to do with being an attack dog. We have to assume that EU competition commissioner Neelie Kroes has nothing in particular against Sun Microsystems, but through this upcoming investigation she could do irreparable harm to the company as well as to the fortunes of the newly combined company.

Even before the proposed deal, Sun was a distant fourth behind IBM, Hewlett-Packard and Dell for server hardware market share. Since the April 20 announcement, Sun’s market share is in freefall as Sun customers freeze their buying decisions waiting to see what Oracle will do with its hardware business. Adding insult to injury IBM and HP have had a field day picking off Sun users through aggressive new pricing programs.

In late August, Sun suffered its fourth consecutive loss this time reporting it lost $147 million in its fiscal fourth quarter compared to a net gain of $88 million in the same quarter a year ago. The company’s revenues plummeted 31% in the fourth quarter to $2.36 billion. If the EU investigation goes on for even another quarter or all the way to its January 19 deadline - and some pundits believe it will - there will be very little left for Oracle to work with going into 2010.

With Sun’s server business shriveled to that of a second tier supplier, what does this do to the soup-to-nuts, integrated stack computing strategy Oracle executives have been yammering on about since last spring?  More than a few users I have talked to the last few months are now cozying up to the notion of an integrated hardware-software stack from Oracle. They point to the company’s Exadata Database Machine — Oracle databases optimized to run hand-in-glove with HP’s server hardware — saying the system far out distances the performance they get with databases they purchased separately. Can Oracle just walk away from that promise and still look good to users? I don’t see how.

And if Oracle is hoping to pawn Sun’s failing server business off to an IBM or HP after this EU mess gets straightened out in three, four or six months, they may face a fierce level of indifference.

In her statement last week Kroes made it clear one of the major reasons for the investigation is her concern over the world’s largest proprietary database maker taking over the world’s largest open source database. With one company owning all that database software, bad things most certainly are going to happen to database competitors in Europe and user choice will be nill, right?

Come on now, Neelie, this is open source we are talking about. No one can truly own and control a popular open source product like MySQL - it belongs to the community. The best Oracle can do is coordinate some of the development going on around the product. Most open source licenses demand that whatever you create must be thrown back in to the open source ocean for others to use and/or build on.

There should be no fear about MySQL being “Oraclized” taking the heart, soul and brain out of the product so it works better with Oracle’s proprietary products. If Larry’s boys do something like that non-Oracle shops don’t have to buy it. There will always be another version out in the community.

And one other thing: does Oracle’s proprietary database comes close to competing head-to-head with MySQL? Hardly, they are at opposite ends of the competitive spectrum.

So Neelie, for the competitive good of the industry, make this a quick investigation. Competitors are quite able to destroy each other and sometimes themselves - they don’t need any outside help.