You have to know when to hold them, and when to fold them. That's the not just slightly smug assessment by IBM executives as they reflect -- with twinkles in their eyes -- on the months-stalled Oracle acquisition of Sun Microsystems, a deal that IBM initially sought but then declined earlier this year.
Chatting over drinks at the end of day one of the Software Analyst Connect 2009 conference in Stamford, Conn., IBM Senior Vice President and IBM Software Group Executive Steve Mills told me last night he thinks the Oracle-Sun deal will go through, but it won't necessarily be worth $9.50 a share to Oracle when it does.
"He (Oracle Chairman Larry Ellison) didn't understand the hardware business. It's a very different business from software," said Mills.
Mills seemed very much at ease with IBM's late-date jilt of Sun (Sun was apparently playing hard to get in order to get more than $9.40/share from Big Blue's coffers). IBM's stock price these days is homing in on $130, quite a nice turn of events given the global economy.
Sun is trading at $8.70, a significant discount to Oracle's $9.50 bid, reflecting investor worries about the fate of the deal now under scrutiny by European regulators, Mill's views notwithstanding.
IBM Software Group Vice President of Emerging Technology Rod Smith noted the irony -- perhaps ancient Greek tragedy-caliber irony -- that a low market share open source product is holding up the biggest commercial transaction of Sun's history. "That open source stuff is tricky on who actually makes money and how much," Smith chorused.
Should Mills's prediction that Oracle successfully maintains its bid for Sun prove incorrect, it could mean bankruptcy for Sun. And that may mean many of Sun's considerable intellectual property assets would go at fire-sale prices to ... perhaps a few piecemeal bidders, including IBM. Smith just smiled, easily shrugging off the chill (socks in tact) from the towering "IBM" logo ice sculpture a few steps away.
And wouldn't this hold up go away if Sun and/or Oracle jettisoned MySQL? Is it pride or hubris that makes a deal sour for one mere grape? Was the deal (and $7.4 billion) all about MySQL? Hardly.
Many observers think that Sun's Java technology -- and not its MySQL open source database franchise -- should be of primary concern to European (and U.S.) anti-trust mandarins. I have to agree. But Mills isn't too concerned with Oracle's probable iron-grip on Java ..., err licensing. IBM has a long-term license on the technology, the renewal of which is many years out. "We have plenty of time," said Mills.
Yes, plenty of time to make Apache Harmony a Java doppelganger -- not to mention the Java market-soothing effects of OSGi and Eclipse RCP. [Hey, IBM invented Java for the server for Sun, it can re-invent it for something else ... SAP?]
Unlike some software titans, Mills is clearly not living in a "reality distortion field" when it comes to Oracle's situation.
"We're in this for the long haul," said Mills, noting that he and IBM have have been competing with Oracle since August 1993 when IBM launched its distributed DB2 product. "All of our market share comes at the expense of Oracle's," said Mills. "And we love to do benchmarks again Oracle."
Even as the Fates seem to be on IBM's side nowadays, the stakes remain high for the users of these high-end database technologies and products. It's my contention that we're only now entering the true data-driven decade. And all that data needs to run somewhere. And it's not going to be in MySQL, no matter who ends up owning it.
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There's no doubt that IBM will be very happy with this delay, it's going to be causing some internal tensions at Sun, and all sorts of issues for customers discussing the next 5 years of their IT systems, but I don't think it's going to end with Sun in bankruptcy.
ReplyDeleteA smaller, more focussed Sun, working on their core Java and Solaris offerings, ditching things like OpenOffice which are great but hardly relevant to their main business, would be a profitable business which could look at growing again.
At the moment though, they're largely a random collection of business units looking for a reason to exist in one big conglomerate, despite the large number of excellent individuals working there.