Oracle Fights IBM Poaching With Ad

An Oracle ad in the Wall Street Journal reasserts Oracle's intention to invest and continue Sun's Sparc hardware.

Charles Babcock

September 11, 2009

3 Min Read
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Oracle is fighting back against the main source of customer poaching from Sun Microsystems' customer base: IBM.

IBM has been offering "Sun-set specials" for Sun customers to migrate by the end of the year to its Power hardware running AIX Unix. It has advertised in the San Jose Mercury News, "Don't settle for an uncertain future." HP, also a Unix hardware vendor with with its Itanium servers running HPUX, has also been attempting to lure more customers from Sun. "HP To Sun Customers: We've Got Your Back," is one of its messages to them.

But Oracle CEO Larry Ellison is singling out IBM for his response. In an ad that ran in some editions of Thursday's Wall Street Journal, Oracle promised it will spend more on Sparc hardware "than Sun does now," and compete head to head with IBM on hardware after it takes over Sun. "We're in it to win it. IBM, we're looking forward to competing with you in the hardware business," said the ad, above Oracle CEO Larry Ellison's name.

The stance is being aired as Oracle struggles to satisfy a European Commission investigation and get the $7.4 billion acquisition of Sun back on track. Oracle had hoped to complete it in August. It appears that the ongoing investigation will stretch out through the end of 2009 and into 2010. The ad also asserts that Oracle will spend more on continued development of the Solaris operating system than Sun does now. "Oracle plans to have more than twice as many hardware specialists selling and servicing Sparc/Solaris systems than Sun does now," the ad continued.

Oracle plans to "dramatically improve Sun's hardware performance by tightly integrating Oracle software with Sun hardware," the ad states.

The advertisement is a sign of how seriously Oracle views the Sun customer base as part of the value of Sun. At JavaOne, Ellison said Oracle has sold many database systems to run on Sun servers. Linux servers make up its fastest growing business, but Sparc/Solaris platforms remain its largest installed base, he said.

Before Oracle announced its intended takeover of Sun, however, IBM had been eating into Sun's share of the Unix server market. At one time, Sun lead the field in terms of revenues from sales of Unix servers, but in 2005 HP lead the field with 32%, according to figures from IDC. IBM has since moved into the lead, with HP second and Sun trailing in third. The hazard to Oracle, during a drawn out acquisition, is that third place will become more distant from the market leaders, as Sun's hardware future awaits new investment.

"I can completely sympathize with Ellison's position," said James Staten, Forrester Research analyst. He remains skeptical that Oracle will immediately make money on the Sun acquisition as it claimed in April, as the deal was announced. If it invests in hardware the way it says it will, it’s not clear how the purchase will be accretive at the rate of 15 cents per share in its first year, he said.

But the greater danger to Oracle is that the value of the acquisition is being diminished by a drawn out European Union investigation. HP and IBM have been given "another four months to make their appeals," he said. "Whenever you leave a void, the competition fills it. It's a feeding frenzy."


InformationWeek has published an in-depth report on Sun's future under Oracle. Download the report here (registration required).

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