As a result of acquiring Sun Microsystems (NSDQ: JAVA), Oracle will become an operating system and hardware vendor, two things it's expressed little interest in doing in the past. And in doing so, it will compete more directly with two powerful systems vendors that are frequently its partners, IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ).
But there's a reason this deal has come off when negotiations with IBM, which is a hardware and operating system vendor, led to a dead end.
As Silicon Valley neighbors, Sun's and Oracle (NSDQ: ORCL)'s leadership have been allies and supporters of each other's interests for two decades. Oracle was an early Java supporter, perhaps second only to IBM, and sold many of its database systems to run under Sun's Solaris. Even when it announced several years ago that Linux was its target operating system, Oracle continued to sell the largest share of its databases under Solaris.
"In our opinion, Solaris is by far the best Unix operating system on the market," CEO Larry Ellison said at a teleconference announcing the deal this morning. More Oracle databases run under Solaris than Linux, which is the No. 2 operating system for Oracle "and still important to us," Ellison said.
"Sun and Oracle grew up together in the Silicon Valley. There was more synergy between them. Oracle is a better choice, culture wise, than IBM," said Gartner analyst Kenneth Chin.