Oracle, Google and Java – Oh My

A follow-up to this post, now that some additional information is coming out.

James Gosling has made another interesting post with some historical information, including the fact that as a result of an IBM lawsuit some Sun engineers made an unofficial game out of seeing how ridicuouls of a patent they could get approved:
In Sun’s early history, we didn’t think much of patents. While there’s a kernel of good sense in the reasoning for patents, the system itself has gotten goofy. Sun didn’t file many patents initially. But then we got sued by IBM for violating the “RISC patent” – a patent that essentially said “if you make something simpler, it’ll go faster”. Seemed like a blindingly obvious notion that shouldn’t have been patentable, but we got sued, and lost. The penalty was huge. Nearly put us out of business. We survived, but to help protect us from future suits we went on a patenting binge. Even though we had a basic distaste for patents, the game is what it is, and patents are essential in modern corporations, if only as a defensive measure. There was even an unofficial competition to see who could get the goofiest patent through the system. My entry wasn’t nearly the goofiest.

He notes that “Apple’s expected entry into advertising” (now iAds) may have been the initial impetus for Android and adds “Don’t interpret any of my comments as support for Oracle’s suit. There are no guiltless parties with white hats in this little drama. This skirmish isn’t much about patents or principles or programming languages. The suit is far more about ego, money and power.”

Charles Nutter has an extremely detailed post where he breaks down each of the patents one by one. While lengthy, if you’re interested in this topic you should read the entire post (probably twice). Here is part of his conclusion:
So, Does the Suit Have Merit?

I’ll again reiterate that I’m not a lawyer. I’m just a Java developer with a logical mind and a penchant for debunking myths about the Java platform.

The collection of patents specified by the suit seems pretty laughable to me. If I were Google, I wouldn’t be particularly worried about showing prior art for the patents in question or demonstrating how Android/Dalvik don’t actually violate them. Some, like the “mixed mode” patent, don’t actually seem to apply at all. It feels very much like a bunch of Sun engineers got together in a room with a bunch of lawyers and started digging for patents that Google might have violated without actually knowing much about Android or Dalvik to begin with.

But does the suit have merit? It depends if you consider baseless or over-general patents to have merit. The most substantial patent listed here is the “mixed mode” patent, and unless I’m wrong that one doesn’t apply. The others are all variations on prior art, usually specialized for a Java runtime environment (and therefore with some question as to whether they can apply to a non-Java runtime environment that happens to have a translator from Java code). Having read through the suit and scanned the patents, I have to say I’m not particularly worried. But then again, I don’t know what sort of magic David Boies and company might be able to pull off.

He also gives his opinion on the “possible outcomes” as: The Nuclear Option (ie. the death of android, which is *very* unlikely), a Google Licensing Deal, Nothing At All, and the Total Collapse of Software Patents (wouldn’t that be nice).

Matthew Aslett attempts to answer the question of whether Oracle should now be seen as anti-open source:
I want to address is whether Oracle should now be seen as anti-open source.

I believe this theory is flawed. Firstly, because it assumes the open source community is a single, sentient being. As Matt Asay notes: “There is no Santa Claus. No Easter Bunny. And no such thing as an open-source community separate and distinct from the profit-driven free market that drives software development, generally.”

Secondly, because it assumes an emotional relationship between Oracle and open source that is equally non-existent.

As Simon Phipps has explained, corporations are reptiles that react instinctively to survive and thrive. Google’s call-to-arms of the Java open source community can be seen in the same light, especially since Google’s prior relationship with the Java community in relation to Android has been somewhat tenuous (rather than repeat what has been written elsewhere I recommend reading Carlo Daffara for the details).

And let’s not forget that Google’s approach to using open source resulted, at least in part, to the creation of a whole new license, one that the company has actively discouraged.

The statement by Oracle’s chief corporate architect Edward Screven, that “Oracle doesn’t really have an open source-specific strategy” must be understood in the context of this opportunism. The company’s engagement with open source is tactical, and changes on a case-by-case basis. It is wrong, therefore, to expect continuity in Oracle’s approach to different open source projects.

I’m not trying to excuse Oracle’s actions with regards to either Java or OpenSolaris, but I think each must be considered separately. [update - to clarify] Any Oracle related open source project should be approached with caution but… we should all be equally cautious about being encouraged to see the patent claims as a matter of good versus evil or open versus closed.

This is a legal matter between two corporations both of which are opportunistic in their approaches to open source engagement (unless it suits them to be otherwise).

In other words, as Matt Asay explains: “This isn’t about open source for Oracle, really. Nor is it about open source for Google, however much it may want to publicly posture as such.”

Stephen O’Grady attempts to answer a question that has been on many people minds with this post: WHY?
The latter point is perhaps the most important. It’s the only real clue we have to answer the only real question here: what does Oracle want?

Because the answer to that is: not what they’ve asked for in the complaint. Oracle may indeed request recompense for “the damages sustained and will sustain” as well as “any gains, profits, and advantages obtained by Google as a result of Google’s acts of infringement and Google’s use and publication of the copied materials.” But you can be sure that that’s not all they want.

As Andy Updegrove covers, the obvious motivation is financial. Specifically, maximizing the return on the six and a half billion capital expense that bought Sun’s assets, the patents in question included. If Oracle realized the same return as Sun from the Microsoft settlement concerning Java, for example, the cost of Sun becomes four billion. Remaking what was arguably a bargain into a steal.

Purely financial justifications for this suit are less than satisfying, however.

To begin with, Oracle would effectively be trading long term ecosystem health for a short term cash windfall. Unless the settlement is historically immense – a difficult outcome to rely on from a planning perspective – it’s not clear that this would be a net win. For all of its sustained success in the application and database markets, Oracle remains as fundamentally dependent on the Java ecosystem as Sun was before it. Even for a company that’s sought and found growth through stack ownership and category dominance, the health of the ecosystem is and must remain a concern. While the original technology was technically groundbreaking and differentiated, the key to Java’s success lay outside its featurelist. What drove its ascension within enterprises was the reality that Java offered at least the potential for independence from vendors. That will not be surrendered lightly, whatever Oracle may believe. A Java ecosystem dominated by Oracle is a doomed ecosystem. While it’s far from clear that this action by itself would create that perception amongst current Java ecosystem participants, it, coupled with Oracle’s own aggressive history, would be unlikely to be beneficial from a participation standpoint. As Andy put it, “it’s less clear to me what the strategic value would be to Oracle to prevent Google for incorporating Java into Android, or to impede the marketplace generally from relying on Java.”

It can be argued, then, that this is a high risk exercise for Oracle. The only satisfactory return for high risk exercise is high reward. Based on past software settlements, it’s difficult to project this being material to Oracle financially over a multi-year timeframe. Which is why I suspect there’s more at stake here than royalties.

What that is is non-obvious. All that we know about what Oracle wants, realistically, is what they are prepared to surrender. Aside from bearing the hard costs of litigation, Oracle is willing to absorb soft costs in risk to reputation and participation rates in the Java ecosystem. We must expect then that Oracle’s expected return will be commensurate with these costs. Oracle is many things, but stupid generally isn’t one of them.

Perhaps, as Forbes speculates, this is a prelude to a cross-licensing arrangement. Though if that’s the case, I’m far less certain that this suit actually has anything to do with Android; might patents like this “Large-scale data processing in a distributed and parallel processing enviornment” or this “Information extraction from a database” be relevant to Oracle’s core businesses? Perhaps Google is already or plans to compete directly with Oracle in ways we are not aware of yet. Or maybe Oracle just wants Google to buy a bunch of database licenses.

Whatever the real reason, this is a surprising decision even for a firm as aggressive as Oracle. The only thing more surprising is how quickly it turned Google – excoriated around the web for their questionable net neutrality proposal with Verizon – back into the good guys. Even if you speculate about differences in Oracle’s evaluations of its own assets – that Oracle believes that Java has peaked in popularity, for example, and that this is a one time opportunity to cash in on an asset that must, inevitably, decline – the calculus of this move fails. Nothing in Oracle’s product roadmaps hint at such a realization. Nor would a one time windfall, however large, be sufficient to offset the costs of a significant decline in Oracle’s Java related products.

As for predictions, I’ll make only one: whoever wins will also lose. This suit is going to negatively impact – probably substantially – Java adoption. The enterprise technology landscape is more fragmented by the day, as it transitions from .NET or Java othodoxy to multi-language heterogeneity. Oracle’s suit will accelerate this process as it introduces for the first time legal uncertainty around the Java platform. Apple and Microsoft will be thrilled by this development, and scores of competitive languages and platforms are likely to see improved traction as a result of Java defections.

Add up these costs, and the only supportable conclusion is that Oracle’s ambitions here are big.

As Stephen notes, it’s exceedingly difficult to ascertain what Oracle is *really* after here. As more information comes out, their motivation may become more clear and I’ll guess this won’t be nearly my last post on the topic.

In tangentially related news, it’s now confirmed that Oracle is killing OpenSolaris although it remains committed to Solaris itself and will be bringing Solaris Express back from the grave. It also appears that Oracle will continue to commit resources to MySQL, at least for the time being.

–jeremy

Additional Reading:
Techdirt
SAI
Matt Asay
Groklaw
Bradley M. Kuhn
VAR Guy

Oracle Sues Google For Patent And Copyright Infringement

In one of its first big moves with the assets it’s acquired as part of the Sun acquisition, Oracle has just announce that it’s Suing Google for patent and copyright infringement. From the press release:

“In developing Android, Google knowingly, directly and repeatedly infringed Oracle’s Java-related intellectual property. This lawsuit seeks appropriate remedies for their infringement,” said Oracle spokesperson Karen Tillman.

The patents in question are:

* Protection domains to provide security in a computer system
* Controlling access to a resource
* Method and apparatus for pre-processing and packaging class files
* System and method for dynamic preloading of classes through memory space cloning of a master runtime system process
* Method and apparatus for resolving data references in generated code
* Interpreting functions utilizing a hybrid of virtual and native machine
* Method and system for performing static initialization

As Techdirt points out, it’s rare for large Silicon valley tech companies to sue each other like this, so it’s possible there’s more to the story here (and it seems likely the companies may have been negotiating in private for some amount of time):
Over the past few years, Sun has been one of the more outspoken companies against abusing the patent system, with former CEO Jonathan Schwartz explaining that real companies innovate, not litigate. However, Sun and its patents are now owned by Oracle, and apparently Larry Ellison feels otherwise. Oracle is now suing Google for patent infringement, using a bunch of patents that Sun owns around Java, claiming that Google’s Android implementation of Java is done without a license. This is a bit surprising, really, as big Silicon Valley tech companies don’t often get into patent battles with each other — and, historically, when they do launch such patent attacks, it’s usually a sign of something bigger being wrong with the company.

It should be noted that both Oracle and Google are Open Invention Network (OIN) licensees.

A little history on the situation from Ars:
Google makes heavy use of Java in the Android software development kit (SDK). Third-party developers code Android apps in Java, which is then translated into bytecode that runs in Dalvik, Google’s own custom VM. Google subsequently released the Android Native Development Kit, which allows developers to build Android components with C and C++. It is not intended to replace the Java development model, though, which remains the strongly preferred means of Android development.

Aside from its use of Java syntax, Google’s Android SDK implementation is largely independent from Oracle’s. It uses its own compiler and runtime tailored specifically for Android.

Originally developed by Sun Microsystems as a “write-once, run anywhere” language, Java became the property of Oracle when it purchased Sun in April 2009. Java was a significant part of the deal for Oracle, as it has been a major player in the world of Java middleware.

Prior to its acquisition by Oracle, Sun proved hostile to the Harmony Project, the Apache Software Foundation’s attempt to build an Apache-licensed Java SE implementation. In addition to Dalvik, Google also uses Harmony’s class libraries in Android, which has apparently aroused the ire of Oracle.

Carlo Daffara has posted a good analysis:
Let’s clear the table from the actual patent claims: the patent themselves are quite broad, and quite generic; a good example of what should not be patented (the security domain one is a good example; look at the sheet 5 and you will find the illuminating flowchart with the representation of: do you have the rights to do it? if yes, do it, if no, do nothing. How brilliant). Also, Dalvik implementation is quite different from the old JRE one, and I have strong suspicions that the actual Dalvik method is substantially different. But, that is not important. I believe that there are two main points that Oracle should have checked before filing the complaint (but, given the use of Schiller&Boies, I believe that they have still to learn from the SCO debacle): first of all, Dalvik is not Java and Google never claimed any form of Java compatibility. Second, there is a protection for patents as well, just hidden in recent history.

On the first point: in the complaint, Oracle claims that “The Android operating system software “stack” consists of Java applications running on a Java-based object-oriented application framework, and core libraries running on a “Dalvik” virtual machine (VM) that features just-in-time (JIT) compilation”. On copyrights, Oracle claims that “Without consent, authorization, approval, or license, Google knowingly, willingly, and unlawfully copied, prepared, published, and distributed Oracle America’s copyrighted work, portions thereof, or derivative works and continues to do so. Google’s Android infringes Oracle America’s copyrights in Java and Google is not licensed to do so … users of Android, including device manufacturers, must obtain and use copyrightable portions of the Java platform or works derived therefrom to manufacture and use functioning Android devices. Such use is not licensed. Google has thus induced, caused, and materially contributed to the infringing acts of others by encouraging, inducing, allowing and assisting others to use, copy, and distribute Oracle America’s copyrightable works, and works derived therefrom.”

Well, it is wrong. Wrong because Google did not copied Java – and actually never mention Java anywhere. In fact, the Android SDK produced Dalvik (not Java) bytecodes, and the decoding and execution pattern is quite different (and one of the reasons why older implementations of Dalvik were so slow – they were made to conserve memory bandwidth, that is quite limited in cell phone chipsets). The thing that Google did was to “copy” (or – for a better word – inspire) the Java language; but as the recent SPSS-vs-WPS lawsuit found, “copyright in computer programs does not protect programming languages from being copied”. So, unless Oracle can find pieces of documentation that were verbatim lifted from the Sun one, I believe that the copyright part is quite weak.

I have to wonder if the timing of this suit has anything to do with the negative publicity Google is getting over the recent Net Neutrality issue (and also note that the press release occurred right *after* Linuxcon ended, where Linux in the mobile space was an extremely hot topic.). The recent killing of OpenSolaris made some in the Open Source community even more leery of Oracle’s intention than they already were. This suit should serve to destroy any and all credibility Sun had built up in the FOSS world. It may also be the death knell for Java in mobile. It will be interesting to see how Google responds to this, and it’s certainly a topic I’ll be following closely and likely posting more about as details emerge. It will also be interesting to watch how this impacts other Open Source projects that were acquired by Oracle as part of the Sun portfolio.

Finally, James Gosling (the father of the Java) notes:
Oracle finally filed a patent lawsuit against Google. Not a big surprise. During the integration meetings between Sun and Oracle where we were being grilled about the patent situation between Sun and Google, we could see the Oracle lawyer’s eyes sparkle. Filing patent suits was never in Sun’s genetic code.

–jeremy

Additional Reading:

GigaOM
Business Insider
cnet
Joel West
Miguel de Icaza

The Post-Oracle Sun Exodus

It appears Oracle is starting to experience some high profile departures from ex-Sun employees now that the acquisition has been finalized. First came Tim Bray:

Today I resigned from Sun/Oracle — the official integration date here in Canada is March 1st, so I won’t ever have actually been an Oracle employee. I’m not currently looking for another job. I’ll write some looking-back and looking-forward stories when I’ve got a little perspective. I can’t say enough good things about the people at Sun – and outsiders with whom I worked – over the past few years. Thanks for enriching my life!

…then, Simon Phipps:

Today is my last day of employment at Sun (well, it became Oracle on March 1st in the UK but you know what I mean). I am a few months short of my 10th anniversary there (I joined at JavaOne in 2000) and my 5th anniversary as Chief Open Source Officer. I hope you’ll forgive a little reminiscence.

Followed by most of the Drizzle team, including Monty Taylor, Eric Day, Stewart Smith, Lee Bieber and Jay Pipes (although notably not including Brian Aker from what I can tell [UPDATE 3/9/10 11:44AM: Ilan has informed me that Brian mentioned leaving Sun during his Drizzle QA at SCaLE 8X. Confirmation here; “Now I work for myself. All opinions expressed are solely the opinion of me, myself, and I…”]):

Although a few folks knew about where I and many of the Sun Drizzle team had ended up, we’ve waited until today to “officially” tell folks what’s up. We — Monty Taylor, Eric Day, Stewart Smith, Lee Bieber, and myself — are all now “Rackers”, working at Rackspace Cloud. And yep, we’re still workin’ on Drizzle. That’s the short story. Read on for the longer one

So, what does this mean for Oracle? Well, obviously less than it would have meant for Sun. Whenever two large technology companies merge, you always expect some attrition… both voluntary and involuntary. That’s what makes M&A in this industry so difficult, especially when Open Source companies are involved. With an Open Source company, much or what you’re acquiring when you buy a company is the people. If those people start leaving in droves, much of the value of the company goes with it.

That being said, this situation is probably a little different. That’s in part because Oracle handles these situations a little differently than most companies and likely knew exactly what they wanted out of Sun when they made the acquisition. With many in the Open Source community already skeptical of Oracle, however, the fact that many of these early departures have been directly related to Open Source positions is not going to instill a lot of confidence. Like Sun or not, they had a huge number of critical Open Source projects under their belt. The stewardship of those projects will help dictate to what extent they flourish moving forward. How Oracle will handle that stewardship remains to be seen. They’re certainly more focused on profits than Sun was, but you can see some positive anecdotal experiences out of previous FLOSS acquisitions such as Sleepycat. My guess is that things will play out substantially different on a project-by-project basis here… and a couple forks and a couple abandoned projects are probably inevitable.

–jeremy

Oracle Sun Merger Closes

As I’m sure you’ve heard by now, the Oracle acquisition of Sun has closed. From MySQL and Java to OpenSolaris, OpenOffice.org and more; it’s difficult to understate the potential impact this will have on the Open Source community. Many people are skeptical of Oracle. This perception, correct or incorrect, may have the ability to negatively impact some of the communities that this acquisition affects. One point that is difficult to argue with is that Oracle is maniacally focused on profitability. That wasn’t always the case with Sun and I’d expect there to be some immediate changes as a result of this. Shortly after the deal closed, Oracle had a five hour webcast discussing Oracle’s plans. As Stephen O’Grady notes, “Between Ellison, Kurian, Phillips and the rest, we got our share of answers yesterday. But as is almost always the case in such situations, there was as much left unsaid as said”. A few tidbits from his very good Q&A:

Q: What’s the big picture of this transaction?
A: What was old is new again? A couple of years back, some of the best and brightest Solaris engineers began blurring the lines between what was hardware and what was software. This skunkworks project was called Fishworks, for Fully Integrated Software and Hardware…works. Basically the project was a storage device that blended features of Solaris (DTrace, ZFS, etc) with some impressive analytics, and an interesting storage hybrid incorporating both disk and flash storage elements. It’s hardware like this, I think, that is the future for Oracle.

Q: How do you figure?
A: As Cote covered in his excellent quick take, Ellison, in planning for the future, is looking to the past. Specifically, IBM’s past. “Our vision for the year of 2010 is the same as IBM’s for 1960,” as he says, meaning that you buy a single machine that has everything you want on it, preintegrated.

Will Oracle still sell you their database if you’re running on, say, Dell servers? Certainly. But will they also be telling you how much faster it runs on their integrated appliance, and how that appliance – through the magic of ZFS and storage pooling – will give you better performance at a lower cost, and real time performance analytics via DTrace? You bet.

Q: Which stated plans are those?
A: In talking to the Journal, Ellison said the following:

“We are not cutting Sun to profitability,” Mr. Ellison said. “We think that this business will be profitable immediately.”

He went on to say, however, that he would be leaving certain non-profitable lines of business:

Mr. Ellison said that Sun will add $1.5 billion to Oracle’s bottom line in the first year, largely because he will get out of “businesses that don’t make money.”

Q: Which businesses are those?
A: Exactly.

Q: Meaning we don’t know?
A: It’s certainly less than obvious. Likely candidates like NetBeans or OpenOffice.org were explicitly mentioned on yesterday’s call, which presumably wouldn’t be the case if the plan was to immediately retire them. No, the Sun Cloud and OpenSolaris were but a few of the obvious product lines that were MIA on Wednesday.

Q: What is Oracle going to do with OpenOffice?
A: Apparently continue to invest in it, and marry it to that which Ellison hates most in a product referred to as “Cloud Office.”

Q: MySQL is getting its own salesforce, though, right?
A: MySQL will maintain an independent sales and development staff, yes, though organizationally it will be grouped with Oracle’s open source GBU. You could argue that this is because MySQL’s more of a competitive threat, that it’s natural given the differing markets served by the products, or that it’s at the behest of the EU. Or all of the above. Either way, it means that MySQL – at least for now – has some room to move.

Q: Back to the operating system question for a second. When the acqusition was announced, you said the following:

The betting here is that Solaris will continue to be supported, but not as a frontline option, with the possible exception of cloud offerings where the quirks of the operating system are rendered invisible by the platform. Think IBM with AIX, HP with HP-UX, and so on: there is ample precedent for the (successful) continuation of two competing product lines, and as Oracle itself acknowledges above, there’s an awful lot of Oracle running on top of Solaris.

You further speculated that some of the Solaris assets might be candidates for relicensing. What do you think now?
A: That that view is wrong. We’ll see, of course, how things play out, but it would certainly appear that Oracle is committed to the Solaris platform indefinitely. Personally, I think that will be difficult to manage over time, but it’s pretty clear that the above guess was off. As some Sun folks were kind of enough to tell me when it was published.

If anything, Oracle advantaged Solaris vs Linux during yesterday’s presentation. When discussing them both, Solaris came first and had bullet points like Secure, Scale, and so on. Linux? It was described as the most “widely used” operating system.

I remain convinced that Oracle will have a tough time maintaining and messaging two competitive products, but given the depth of their appliance ambitions they may see that as a short term problem only.

As you can tell, in the short term there are probably going to be more questions than answers. While it seems MySQL is safe for now, how the developer community reacts to the Oracle ownership of the product remains to be seen. Will people stick with MySQL? Will Percona or MariaDB be the ones to benefit? Or will it be a completely different DB such as PostgreSQL that gains as a result.

While it’s clear that Oracle is going to kill some products, there doesn’t seem to be a consensus on exactly what will survive. That uncertainty could be extremely detrimental to some projects. One of the biggest questions for me is what will become of OpenSolaris/Solaris and how that decision will impact Linux support within the company. Sun had a mixed history with Linux, but Oracle has been a big proponent recently. Will they switch gears and go with a product they have more ownership over, or will they stick with Linux which is doing much better in the marketplace.

I have quite a bit of other commentary on this topic, but I’ll attempt to break that into separate posts in the near future as more information becomes available.

Additional Reading:
* Sun & Oracle’s impact on open source acquisitions
* Best of luck to Jonathan, who is stepping down.

–jeremy

Red Hat: Bad economy is good for Open Source

From a post by Matt Asay:

Well, on Wednesday Red Hat announced fiscal first-quarter revenue of $174 million, up 11 percent from the prior year. Subscription revenue was up 14 percent year over year to $148.8 million. The company’s total deferred revenue balance is now $567.3 million, an increase of 15 percent on a year-over-year basis. Net income for the quarter was $18.5 million.

Both Oracle and Red Hat are doing well, and Oracle is obviously dealing with much bigger wads of money, but it seems clear that Red Hat’s open-source model is the big winner in the recession.

In fact, on Red Hat’s earnings call, Chief Executive Jim Whitehurst indicated: “Budgets remain tight and we don’t see an end in sight for this. In relative terms, this is pretty good for us.” He went on to call out the big differentiator for Red Hat’s business: certified ecosystem.

The key differentiator for us in Linux is our certified ecosystem. Even those that are clones of RHEL [Red Hat Enterprise Linux] lack this certified ecosystem. The second differentiator is value: great service and support at a compelling price.

We have a very disciplined business model which is based on commoditizing key parts of core infrastructure. We’ve been laser-focused on this. Open source is particularly good at that. We’d certainly like to work with other open-source companies but they have fundamentally different business models than we have.

Repeatedly asked on the earnings call about competition from Oracle, Red Hat executives took turns dismissing Oracle’s Solaris (“When customers decide to jump from Solaris they go straight to Linux, skipping OpenSolaris”) and Oracle’s Linux strategy (“We’ve yet to lose a major customer over the last year to Oracle’s Linux offering. The only one to leave Red Hat in the past couple of years is Oracle itself.”).

You can view the full RHT quarterly report here. Red Hat continues to do well and I think it’s become clear that the continuing recession can benefit certain Open Source business models. Matt makes a very good point in his post though. At some point, the UNIX-replacement business is going to slow. Currently that business is a huge chunk of Red Hat sales. When that slowing finally happens, Red Hat is going to have to look to others places for growth and competing more directly with Microsoft seems like one clear place to look for that growth. Today, less of Red Hat’s sales come at Microsoft’s expense than many people realize. It may very well take an acquisition or two for that to change. With JBoss now fully consumed, some additional acquisitions seem inevitable, but they may not come for a little while for a couple reasons. First, most companies are trying to conserve cash right now, and Red Hat is no exception there. Secondly though, Red Hat really has to be careful whose toes it steps on with its acquisitions. They learned that lesson the hard way with JBoss. That being said, at some point they may end up being too conservative in this regard. Competing with much larger companies means you have to use your small size to your advantage and take risks. I think Red Hat is up to the task, it may just take a little time to find the value and situation they’re looking for.

Disclosure: Earlier this year I held a moderate position in NYSE:RHT. I no longer hold that position.

–jeremy

Oracle Sun Acquisition Musings

A little time has past since the announcement that Oracle would acquire Sun. While there are still many unanswered questions, I thought I’d post a quick update on the topic.

The first topic I’ll cover is the Sun hardware business. From a recent interview with Larry (via Ostatic):

“No, we are definitely not going to exit the hardware business. While most hardware businesses are low-margin, companies like Apple and Cisco enjoy very high-margins because they do a good job of designing their hardware and software to work together. If a company designs both hardware and software, it can build much better systems than if they only design the software. That’s why Apple’s iPhone is so much better than Microsoft phones.”

Ellison also confirms in the interview that far from discontinuing the SPARC chip, he intends to increase investment in it. “We think designing our own chips is very, very important,” he said. He also notes that Sun outsources almost all of its manufacturing to companies such as Fujitsu.

So it looks like Oracle will indeed be pursuing the “entire stack” path that many predicted. One major benefit to Oracle here is that if a customer is getting both their hardware and software (including both the OS and applications) from the same company, it makes switching away from that company extremely costly and complicated.

That brings us to the OS. It’s still not clear to me which way Oracle is going to go here. Long term I can’t see Solaris and Linux being first class citizens within Oracle. Which one they choose remains to be seen. They “own” Solaris in a way they could never “own” Linux, which may be the deciding factor for a company like Oracle. That being said, I’d imagine more of their customers want Linux so it’s certainly not going to be an easy decision. Some are speculating (via Matt) that if Oracle does go with Solaris that a company like IBM may acquire Red Hat. I’m not so sure about that, but it is a possibility. While IBM does really like Linux, Jboss would be a major duplication for IBM (and it represents a lot of the growth potential within Red Hat).

Finally, here’s a recent announcement regarding MySQL:

The following was in the just released monthly bug report for the Falcon storage engine:

“With the news that Sun has aggreed to be purchaced by Oracle, Some inevitable changes will occur. Once the acquisition is made, the need for Falcon as a MySQL storage engine will be re-evaluated. Until then, Falcon will continue to improve stability and performance. The team will also evaluate other technical niches that may be unique to Falcon.”

I for one would be very disappointed to see Falcon not supported by Oracle. I know they have worked very hard to create a next-generation storage engine. While it could be argued that InnoDB can fill all use cases, I believe that choices are a good thing and having one less choice is not a good thing.

Good luck all on the team. You have been nothing but kind and generous when answering my dumb questions via email and in person. You can count my vote for “keep it!!”.

I think it’s clear that this acquisition will mean some significant changes for the future path of MySQL. The fact that a lot of upcoming MySQL-related innovation may come from outside the company, and from places like the Open Database Alliance should at least ensure that MySQL remains viable from a technology standpoint.

–jeremy

Oracle Agrees to Acquire Sun Microsystems

With rumors of an IBM acquisition still swirling, early this morning Oracle announced that it is acquiring Sun for roughly $7.4 billion. From a CNET article:

Oracle and Sun announced Monday that they have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash. That puts the value of the transaction at about $7.4 billion, or $5.6 billion net of Sun’s cash and debt.

Oracle President Safra Catz said in a statement:

We expect this acquisition to be accretive to Oracle’s earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle’s non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined.

To me, IBM seems like a better fit for Sun and this acquisition leaves as many questions as answers. While Oracle recently announced a hardware product line in a partnership with HP, do they really want to be in the hardware business themselves? A few years ago Larry Ellison definitively said they did not want to be in that business. With much of Sun’s revenue coming from hardware, will they spin that division off or use it to focus more on a complete Oracle stack, that includes everything from hardware to database. Moving to the individual parts of that stack, will Oracle continue with the Sparc CPU line or be interested in the more commodity x86 lines. At the OS level, will Oracle continue to focus on Linux and their Unbreakable implementation or will they attempt to keep Solaris alive. Oracle has been contributing to Linux in a significant way recently, and it would be a huge loss for that to go away IMHO. At the recent Linux Foundation summit Oracle touted that it views it’s upcoming btrfs filesystem as superior to ZFS. What does the future hold for projects such as that?

That brings us to MySQL. I’d contend that MySQL is “worth” more to Oracle than it is to any other company (including IBM) and here’s why. To most other companies, MySQL is roughly worth the net present value of future projected MySQL revenue. The thing most people don’t understand about the MySQL/Oracle relationship is that for many small to medium commercial projects, MySQL is “good enough” and has a much lower TCO than Oracle. Even so, many companies didn’t actually want to go with MySQL for a variety of reasons (many political and procurement related). This created a situation where the *option* of MySQL effectively capped the price people would spend on low end Oracle projects. It wasn’t just the number of people actually leaving Oracle for MySQL, it was the number threatening to and getting additional (and sometimes steep) discounts on Oracle as a result. This creates a premium to Oracle that no other company would have been able to extract. What this acquisition means for the long term future of MySQL within Sun is unclear to me. Oracle has owned InnoDB for a long time. This could either be a long overdue reunion of Inno and MySQL, or the beginning of a slow death for MySQL. One where Oracle doesn’t overtly kill the project, but deprecates any features it sees as threating to its main cash cow and relegates MySQL to a web-only type product. On a related note, the acquisition almost certainly means the end of Postgres support within Sun.

It seems one piece that will certainly benefit from the acquisition is Java, although I’d imagine that IBM is not too happy that Oracle now “owns” Java. Eclipse might have to change it’s name now ;) Also, the rivalry between Larry and Bill Gates is well known. Does this mean that Oracle will be interested in funding addition OpenOffice.org development even thought it’s *way* outside their normal target market?

In the end, Oracle is one of the best acquisition machines on the plant. They have been purchasing and integrating companies for a long time. They’ve become very good at it. However, most of the companies they have acquired have been very specific targets in niche markets that aimed to fill a perceived gap in Oracle’s offerings. Sun is not that. They are a huge company with a massive product line that spans hardware and software. This is not the average Oracle acquisition and the decisions Oracle makes will have massive implications not just for Open Source but for the entire IT industry.

–jeremy

(Note: Interestingly, the Oracle press site has been down with a “Server is too busy to handle request” for the last 30 minutes. I’ll update the first link in this post as soon as it’s back up. Until then, here’s a NYT article.)

[Updated] Additional links:

Glyn Moody
Matt Asay
Larry Augustin

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