Sun-Oracle: Death by Bureaucracy

Rob Enderle

The combination of Sun and Oracle (Snorkel), is increasingly looking like the company that can never be. After it finally appeared to get through EU approvals, now Russia is threatening to block the merger (China may follow), due to their inability to distance themselves from MySQL, which has likely added billions to the cost of this merger and effectively taken billions from the value of the merged company. Here in California, where both companies are located and where we may shortly need snorkels to breathe, it was being reported (mis-reported?) that Oracle will have to lay off around 50 percent of the remaining Sun employees if the merger goes through, creating serious doubts about what will be left if this increasingly troubled merger goes through.

 

MySQL: Why Not Dump It?

 

This seems to be at the core of both the EU and Russian objections, and if Oracle really doesn't intend to kill the offering, as has been alleged, why not spin it out? Certainly, as a failed company, Sun wouldn't be able to support it and it clearly isn't strategic to Oracle's future unless it does plan to kill it. You would think all parties would be happy with this outcome.

 

The cost of retaining control over MySQL now appears to have turned what could have been an easy slam-dunk merger, at least in terms of regulatory approval, into a bureaucratic nightmare.

 

It almost looks like the purpose of the acquisition, given how much effort has been put in to retain control over MySQL, WAS to eliminate this open source competitor.


 

MySQL Open Source Mistake

 

Merger practice is doing your homework up front and then executing the merger sharply -- the property begins to degrade the moment the merger is announced and until the combined company is fully functional. Oracle is one of the best acquiring companies on the planet and clearly did not anticipate the kind of problems it was going to run into with MySQL.

 

Proprietary companies tend to look at competing platforms based on revenue generated and have not really yet come to grips with the political nature of open source offerings. The power in open source isn't in revenue, it is in people, and politicians are moved by people. In fact, open source offerings may have more government clout than proprietary offerings in many situations because while they can't collectively contribute to a campaign significantly or pay for lobbyists, they can field impressive numbers of people who can flood in-boxes and get media attention.

 

I think Oracle's mistake was that it trivialized the need to make sure the MySQL supporters were on board and, as a result, is facing what appears to be an extended and expensive political battle. This suggests a word of caution when acquiring -- by intent or accident -- any open source offering.

 

A lot of additional stake holders in an open source offering need to be comfortable with what is going on and they appear to have recourse if you don't meet their needs.

 

Wrapping Up: Did MySQL Sink Snorkel?

 

It sure looks that way, but this may also be an indicator of how increasingly political mergers and acquisitions will become in the coming decade, particularly with regard to open source companies. There is some irony here; it was partially Oracle and Sun's fault that the EU started looking heavily at U.S. tech companies when they used the European Commission to go after Microsoft. But regardless of the cause, the end result appears to be a growing interest in making some of these deals very difficult to do now.

 

There is a place where staff reductions can effectively make a company non-viable. Sun is clearly approaching that point. Unable to defend its base while it is in merger limbo, and with Oracle limited as to what it can do until it takes control of the firm, a positive outcome is increasingly unlikely.



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Jan 19, 2010 7:11 AM a. asdf a. asdf  says:

--"It almost looks like the purpose of the acquisition, given how much effort has been put in to retain control over MySQL, WAS to eliminate this open source competitor."

I don't see how you can kill or eliminate MySQL, since it's open source software. According to Wikipedia, the MySQL project has several forks ready in anticipation of such a move by Oracle.

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Jan 19, 2010 7:26 AM Rob Enderle Rob Enderle  says: in response to a. asdf

You would think right? I believe Oracle has argued this, evidently enough folks disagree (including one of the founders) that it has held up the merger. 

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