EMC and Oracle shared a lot of headlines this week. Two days ago, EMC brought out its Greenplum Data Computing Appliance that will take on Oracle’s Exadata system. Then Thursday, the companies were linked by rampant rumors that Oracle is looking to buy EMC in a blockbuster deal.
Despite the speculation, it’s a lot more likely they will go on as competitors and in manay cases partners than they will merge into one company.
It’s hard to say exactly how the rumor got started. There was a note from a Wall Street analyst Wednesday speculating on companies that Oracle might buy. EMC was on that list of 12 companies, listed as a potential long-shot. Still, that touched off a spark among investors, who had probably been hearing whispers that Oracle wants more storage and is intereted in VMware. EMC owns more than 80% of VMware, but is unlikely to sell that valuable asset on its own.
“I don’t know who started this talk,” a Wall Street analyst who covers storage told me. “I am sure there are bankers pitching EMC to Oracle, even if that deal doesn’t make any sense. Usually the target leaks these things, but I’m pretty sure EMC did not leak or start the rumor.”
After all the big deals we’ve seen this year in technology, more credence is given to rumors than usual. But this deal doesn’t seem credible, for several reasons:
Too expensive – Most analysts say EMC plus VMware would be worth more than $50 billion. Oracle would have to finance at least two-thirds of that, and that might not be so easy to do these days.
Too complex – Integrating large companies always brings about a transition period where product development and sales take a hit. The bigger the company that gets integrated, the longer this period usually lasts. Oracle is just about finished with its Sun integration, is this a good time to start another?
Too much technology – Oracle has shown with Exadata and its recent ZFS Storage Appliance upgrades that its strategy is to sell storage specifically to make its databases run better. While EMC would make a case for its storage doing that, what about all of its other products? Does Oracle want EMC’s full backup, security, and content management platforms? It would have to pay for all those pieces whether they fit or not. It could sell off the parts it doesn’t want, but that just adds to the complexity of the deal.
If Oracle CEO Larry Ellison wants a broader storage portfolio than he got from Sun, he’s better off going for a smaller company such as NetApp. If he wants VMware, he’s probably out of luck.