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Oracle-Sun Microsystems Deal Winners and Losers

• Date: 27-04-2009
• By: Jessica Davis

Oracle and Sun Microsystems surprised the computer industry a week ago with news of a planned acquisition by Oracle of Sun. Now that a week has passed, here's a look at the likely winners and losers in this deal, from employees to shareholders to reseller channel partners.

A week ago, Oracle (NASDAQ:ORCL) and Sun Microsystems (NASDAQ:JAVA) surprised the industry, announcing that Oracle would acquire Sun. The deal made sense to many industry observers—much more so than the previously proposed IBM (NYSE:IBM) acquisition of Sun. But as with any acquisition, some people will end up better than before, while others will be hurt by the deal. Here’s a roundup of Oracle-Sun deal winners and losers.

Sun employees – Losers
Based on Oracle’s projections of how much more profitable it can make Sun’s operations, analysts are predicting the company will cut between 5,500 and 10,000 jobs. It’s a good bet that most of those will be cut from the acquired company Sun, and not from Oracle’s existing culture.

Sun shareholders –Winners
Ever since IBM and Sun leaked the news of their ongoing acquisition talks, Sun shareholders have been rewarded with higher prices. Sun had been trading at just under $4 (£2.73) before the IBM news, when they jumped to just under $9 (£6.14). Now that a deal with Oracle has been announced and seems assured to go through, shares are trading at $9.20 (£6.27), a little below Oracle’s price of $9.50 (£6.48) per share for Sun.

MySQL shops and other community members participating in Sun’s open-source holdings – Still unclear
While Oracle called out the importance of Java and Solaris when it announced the deal to acquire Sun, other software was not mentioned at all. Most conspicuously absent were Sun’s database software MySQL and Sun’s open-source office productivity applications. Questions still remained at the end of last week.

Sun channel partners – Winners and losers
While some channel partners say demand has remained steady for the company’s solutions, the times have not been happy for everyone. Sun’s recent earnings reports have painted a bleak picture of what’s been going on with the company’s sales of its SPARC hardware and Solaris operating system. And since the deal with IBM was first leaked in March, Sun’s customers have wondered about the future of Sun’s products and delayed deals as a result. Uncertainty has been the enemy of Sun’s channel partners.

Now that the uncertainty seems to be over, some deals may flow again. Oracle has expressed a commitment to certain Sun products, including Solaris, Java and even Sun’s SPARC computer hardware. That’s got to give end customers more confidence about the future of their investments in Sun products.

Sun's largest distributor, Avnet, expressed guarded optimism about what the deal will mean to sales, and said it will do all it can to help both Sun and Oracle.

However, Oracle has never been viewed as the most channel-friendly vendor in North America. Sun partners will likely see their channel program absorbed into Oracle’s. Channel partners that demonstrate loyalty to Oracle’s vision of an end-to-end solution for end customers will likely be rewarded. But keep an eye out for how Oracle, which has a strong direct sales force in North America, handles channel conflict.