Oracle Acquires Sun = Big Mistake
After more than a week of deliberations, the jury in Oracle v. Google finally came back with a verdict over patent infringement on Wednesday. Oracle claimed Googles Android tramples on its intellectual property rights to the Java programming language, but the jury disagreed and ruled that Google has not infringed Oracle Corps patents, putting an indefinite hold on Oracles quest for damages in a fight between the two Silicon Valley giants over smartphone technology. But this is all a distraction from the real disaster at the heart of the company.
Buying Sun Microsystems was a historic mistake, and in another Oracle lawsuit HP claims in their filing that according to internal communications Oracle executives thought that the Sun acquisition was a huge mistake.
Oracle claims that it acquired Sun because it was a software company providing Oracle with Java, Solararis, and MySQL. In all actuality, Sun was predominately a hardware company selling computers and computer components - primarily Sun servers. Sun’s server business has always outdone Sun’s software business.
What Oracle was really after was a bigger share of it’s customers’ wallets. Oracle hoped the combination of its own database software with Sun hardware would provide just that. There was substantial sales acceleration last year after the deal closed, but the current quarter would have to be a blow-out to match last year's $35.6 billion in revenue -- and so far they're just over $26 billion.
Not that this is anything new. Many companies lose their customer mandate and seem to die a rather quick death. Take a look at companies like Compaq, Wang Labs, Silicon Graphics or Data General. These companies tend to loose share and support becomes harder to come by. After spending a hefty price on an acquisition, balance sheets can be killed for years.
Oracle's server share is down to 5.6% and it looks as if the trend will continue for the foreseeable future. And at what point does that share reach the vanishing point, as Palm has in Data Organization?
By saying Oracle bought Sun to get its software, management seems to have seen this coming.
Oracle replaced Project Harmony, with OpenJDK, another open source project under its control. Then they took Google to court claiming they had "stolen" Oracle’s property (obtained while Sun owned Java and had it under the general public license), knowing that if you don't have header information (the only bit Google "stole") you can't build a compatible system.
While the press might have a heyday with all this and Larry Ellison, Oracle's cofounder and CEO, appears to be all distraught over the whole thing, the real investors see what’s going on.
In this case, it's hardware. Ellison is promising a turnaround, but if you’re a betting man money says he can't deliver.
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