Eye on Oracle

Jun 16 2010   3:45PM GMT

Is the Oracle-Sun acquisition on the verge of failing?

Shayna Garlick Shayna Garlick Profile: Shayna Garlick

The last person who would want to hear ‘Sun acquisition’ and ‘fail’ in the same sentence is Larry Ellison.  But if revelations continue to emerge about the possibility of the Sun merger not being the success Ellison had planned for, it may be hard for him to avoid.

Larry is no newcomer to acquisitions — or successful ones either.  But the way that Oracle’s CEO gauges an acquisition’s success is likely in many ways different than how his employees and customers see it.

Last week, Oracle announced that Oracle would be cutting more Sun jobs than it had originally stated in its Sun restructuring plan back in February.  The fact that Larry is going against his original claims now puts his credibility – and his purposes for the Sun acquisition – into question.

Blogger Rob Enderle thinks that Larry’s miscalculation about layoffs is signifying a larger problem. “It speaks to how difficult the Sun acquisition is proving to be and raises the specter that it might actually visibly fail” he writes in his recent post, “Is Snorkel (Sun and Oracle) sinking?”

But just like Larry, Enderle knows a thing or two about acquisitions. He used to run a post-merger clean up team for IBM, and has seen what causes most mergers to fail (the majority of which do, he writes).  Enderle discusses three key merger problems that are contributing to the downfall of Sun and Oracle: due diligence, inadequate merger plan and image maintenance.

When it comes to image maintenance, Enderle says that organizations and executives often cover up problems with the merger to protect their image. At some point, however, the problems emerge, and usually at the point when they are much worse than they were to begin with.

This is what happened with the recent layoffs, Enderle writes. After making an initial announcement that Sun employees would not have to worry about layoffs, this layoff announcement and subsequent actions were delayed, incurring extra costs.

According to Enderle, this is only the beginning:

If this is happening in one area, it is likely happening in others as well. Layoffs of this scale typically have a lagging impact on the performance of a firm as processes and relationships that depend on these ex-Sun employees degrade across the firm. This suggests that the Sun-Oracle merger is in deep trouble.

What do you think about the current state of Oracle/Sun? Do you agree with Enderle and think there are existing problems that have not yet emerged? Any predictions?

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