Eye on Oracle

Sep 9 2009   2:43PM GMT

The EU fiddles while Sun burns

Ed Scannell Ed Scannell Profile: Ed Scannell

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.

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