Microsoft has had few critics more vocal than Oracle CEO Larry Ellison and Sun Chairman Scott McNealy. With their companies set to merge in a blockbuster US$7.4 billion deal announced Monday, is it time for Microsoft to worry?
In fact, the opposite may be true, some industry observers said.
If Oracle retools itself as a systems vendor, as it suggested that it might, that could put pressure on server vendors such as Dell and Hewlett-Packard to cozy up more with Microsoft, which does not operate a competing hardware business.
"Historically, [Oracle] has been a major partner for HP, given HP's lack of a large software business," wrote Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co. "Going forward, we believe that HP is likely to push alternatives to [Oracle] when possible, given that they are now direct competitors in the hardware space."
If hardware divisions at Oracle partner companies feel threatened by the deal, it could be bad news for Oracle's software business, according to Miko Matsumura, a former Sun executive who is now deputy chief technology officer at Software AG. "The hardware business is king, and anything that threatens that becomes your mortal enemy," he said.
Matsumura believes the deal could drive HP into a tighter relationship with Microsoft as Oracle tries to work through the massive acquisition. "In the midterm, I think it [will be] a big bloody mess," he said of the deal. "I think HP is going to steer clear of Oracle."
Another bonus for Microsoft is that there may soon be one less database vendor for it to compete with, since MySQL and Oracle's database will be under one roof. It is unclear whether Oracle will continue to develop and market MySQL alongside its proprietary database, and some think it will allow MySQL to languish. That could give Microsoft's SQL Server more opportunities among Web database users, where MySQL currently dominates.
"I don't think that MySQL is going to thrive now that it is part of Oracle," said Matt Rosoff, an analyst with Directions on Microsoft. "That's kind of a plus for Microsoft."
Some analysts expect Oracle to spin off Sun's hardware business to a company such as Fujitsu, but Ellison didn't offer much insight into his plans during a conference call Monday. He said that software, in particular Solaris and the Java programming language, were "instrumental in Oracle's decision to acquire Sun," but also noted that the acquisition could help Oracle to deliver integrated systems for datacenters -- including the database, middleware, storage and servers.
Oracle has said it intends to make Sun's server business more profitable. If it decides to invest in hardware and become a real systems vendor, that could mean trouble for its partners, who would have to compete with a revitalized Sun product line, according to Stuart Williams, an analyst with Technology Business Research.
"If Oracle retains the complete Sun hardware business, they're no longer a software company; they're a systems company that puts pressure on companies like Dell," Williams said.
But IBM will face pressure too. It would have a more powerful datacenter rival in a combined Oracle-Sun, which would sell a complete enterprise stack of hardware, operating system and infrastructure software -- something IBM alone had previously been able to offer.
Microsoft did not respond to a request for comment for this story. The company's CEO, Steve Ballmer, told reporters in Moscow Monday that he was "very surprised" by the merger news, according to Reuters.
"I need to think about it," he said.
(Agam Shah in San Francisco contributed to this story.)