OracleSun Acquistion Hal R Varian IBMSun IBMSun IBM
Oracle-Sun Acquistion Hal R. Varian
IBM-Sun • IBM-Sun – IBM announced Sun deal at reported value of $9. 55 share = $7 billion on April 3 – After legal review, reduced it on April 5 to $9. 40 – IBM concerns: change of control contracts – Sun concerns: “hell or high water” clause – “Sun is damaged goods. ”
Oracle-Sun • April 21 Oracle announces Sun acquisition at $9. 50/share – $260 million break up fee • stock price • What are implications?
Analysis • Complements – Hardware (servers) + software (database) • Database appliance • One stop shopping – Application (database) + middleware (Java) – OS (Solaris) + application (databse) – High end database (Oracle) + low end database (My. SQL)
Antitrust • Merger of complements usually not an issue; IBM was a bigger issue • Sticking point: My. SQL
Pricing • Versioning? – Low end database transition to high end? – Open source could be an issue • Built in customer list – Differential pricing a big deal – Use My. SQL to compete with SQL server? – Build product line?
Bundling • ELLISON: 'Microsoft was a latecomer to word processing, which was dominated by Word. Perfect. It was a latecomer to spreadsheets, which was dominated by Lotus. Microsoft was late to graphics, dominated by Harvard Graphics, and late to desktop database, which was pioneered by Ashton. Tate/d. Base. So what happened to all these companies? They vanished, because everyone wants all the pieces linked together, and they buy Microsoft Office. ” – http: //www. americanwaymag. com/oracle-corporation-larry-ellison-microsoft-e-business
Lock-in • Fairly high switching costs for corporate database • Switching costs increased by bundling • Can build middleware to database links with Java expertise • Oracle in position to reduce switching costs for My. SQL customers • Want to offer system integration services, but this is tricky due to best of breed v integrated solution
Economies of scale • Supply side – Large development costs as with any software • Demand side – An “industry standard” – Developers build applications on top – Communication links via middleware
Competitive landscape • Other database companies (EMC, Sybase, etc. ) • SAP: Oracle's longtime rival • IBM: former suitor • Microsoft: OS? Database? • Cloud computing?
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