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Oracle Strikes Again

The software maker's purchase of Sun Microsystems could be either boom or bust for IT departments.

In April, Oracle rushed in where IBM decided not to tread, offering $7.4 billion for Sun Microsystems. What will it mean for corporate IT departments? Oracle CEO Larry Ellison described a new era of “applications to disk” integration and lower costs for customers, but analysts aren’t so sure. “Oracle has been very aggressive in ‘optimizing’ its maintenance fees,” says Frank Scavo, president of Computer Economics Inc., “which often leaves customers feeling squeezed. Some may resist the one-stop shop that this deal is creating.”

Oracle declined a request for an interview, but its statement at the time the deal was announced indicates that it has both high hopes and big plans for this latest acquisition. The company said that Sun’s Java platform is “the most important software Oracle has ever acquired,” and that by acquiring Sun’s Solaris operating system, on which Oracle’s database often runs, it can optimize the combined system for greatly improved performance.

Oracle had little to say about Sun’s hardware offerings at the time the deal was announced, and some analysts have speculated that it may in fact sell them off. Gartner analyst Kenneth Chin says that Sun’s storage technology and Oracle’s software, however, could give rise to a new breed of storage “appliances,” or integrated hardware and software products tailored for specific tasks. Chin also says the deal will enable Oracle to offer other “intriguing bundles” of hardware and software. As for Sun’s substantial server business, current customers may feel the impact of the merger differently depending on which lines they use. Chin expects Oracle to put continued muscle behind some products, but deemphasize others.

Despite his reservations about Oracle’s pricing strategies, Scavo says the company “is very shrewd in executing acquisitions, and [it] will probably do a good job of integrating Sun’s assets. Whether that will be good for customers remains to be seen.” The deal is set to close in Q3, barring any regulatory glitches.

Scott Leibs is executive editor of CFO.

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