Thinking Like Apple, Oracle Takes Sun

Thinking Like Apple, Oracle Takes Sun

Everybody has Apple envy — even Larry Ellison. The dashing playboy founded Oracle Corp., whose relational database software makes it the 137th largest company in the world. Ellison, who likes to pilot old fighter jets and lives in a faux Japanese-style mansion, is one of the richest men in the world and another of the great, big personalities of Silicon Valley. Just like his old buddy, Steven P. Jobs. So it was at once surprising — and not — when the news broke this morning that Oracle intends to purchase Sun Microsystems, for around $7.4 billion.

At first glance, the deal makes a lot of sense on the software side alone. Oracle scoops up a competitor MySQL, which is owned and run by a Sun subsidiary. It gets ownership of the Java platform, the write-once, run-anywhere programming language that Sun has increasingly made available as free, open-source software. Java, it turns out, is the platform that supports a suite of Oracle products, so being able to “own” it and direct its evolution gives the database company a critical advantage. Throw in Sun’s Solaris Operating system, which powers millions of servers and workstations around the world, and you’ve got what looks like a compelling acquisition for Oracle right there.

But Sun is also a hardware company; its workstations were the building blocks of the Internet during the Gold Rush days and its machines still dominate the high-end server business.

This is where the Apple envy comes in. When Steve Jobs returned to Apple in 1996 and resurrected it, his centrist, controlling approach looked crazy to many outsiders. The PC business had boomed, after all, in part because the software was separated from the hardware. “PC compatibility” meant that anyone could build a box that ran Microsoft’s Windows operating system, and that initially made many companies enormously successful, from Compaq to Dell. But it also created a race to the bottom as hardware makers were forced to continually offer consumers more bells and whistles for less money. At the same time, Microsoft’s operating system, which had to support an enormous and diffuse ecosystem of computers, became increasingly clunky, hard to use and sedentary.

Jobs showed that locking the software to the hardware and focusing relentlessly on building a perfectly integrated system aimed at the customer, was the superior approach. He gave consumers a first-class experience and got to command premium pricing, protecting Apple’s margins along the way. The iPhone is a similar story, though it’s well known that having to deal with cellphone companies — giving up centrist control — rankles Jobs no end.

I disagree with the observation of some analysts that this deal makes Oracle more IBM than Apple. With the Sun acquisition, Ellison gets a soup-to-nuts business and the ability to integrate everything from chips to boxes to software. But better than serving the fickle consumer market, as Apple does, he gets to slice off the top of the far more lucrative business market. That allows him to protect his margins and better control his company’s destiny — just like Jobs did.
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