Posted by: Mark Fontecchio
Data Center, Oracle, Sun Microsystems
Earlier this week I wrote about the pending Oracle-Sun acquisition, and how Sun Microsystems customers were getting pretty tired of being in limbo, waiting around while antitrust regulatory agencies here and across the pond decide whether to approve it.
Shortly after I wrote my story, in addition to one of our contributors Bill Claybrook writing a solid story on whether x86 Solaris would survive the Oracle acquisition, Clabby Analytics president Joe Clabby wrote a paper taking a look back at the acquisition terms, and the future of the deal.
According to Clabby, “Oracle’s acquisition of Sun needs to be reconsidered, redone, renegotiated, or rejected.” Those are some harsh words right there, but Clabby took some time to break it down. He said that given four factors — revenue losses due to European Commission regulatory delays, loss of Sun engineering and sales talent, migration away from Sun during the delay, and Oracle’s stated earnings goals — that Oracle now has four options:
- Continue with its acquisition plans — and fight the EC (or negotiate in order to gain approval of the Sun plan). Then proceed on its path to become a hardware/software/services provider.
- Continue with the acquisition plan — but once Sun is acquired, sell-off non-strategic Sun assets in order to meet its accretive goals.
- Restructure (renegotiate) its acquisition deal to reflect the previously described market changes
- Withdraw from the Sun deal altogether.
If Oracle chooses to continue with its Sun acquisition plan, Clabby Analytics would expect Oracle to provide new guidance on the effect that the Sun acquisition is now likely to have on its earnings in the near and long term. In fact, Oracle’s investors and the broader market should demand it do so. We suspect that Oracle will be hard-pressed to show that it can meet its current revenue estimates.
Clabby’s column was in the most recent edition of Pund-IT Review, a weekly collection of analyst opinions that analyst Charles King puts together.