Wednesday, April 22, 2009

And the Oracle conquered the Sun

One of the most commented news in the Java world these last days has been the Oracle acquisition of Sun, practically from under the nose of IBM. For some (me included) this came out of nowhere, but it was not a surprise.

We knew that Sun had to be bought eventually by some other giant. There were only four names that could be interested in acquiring Sun, in order of "importance": IBM, Oracle, Microsoft and Google. From these, Microsoft would never pass an anti-trust evaluation of the deal, and Google really doesn't need anything from Sun (owning Java and MySQL could be nice, but not needed).

This leaves only two major players: IBM and Oracle. Given the failed negotiation with IBM it was just a matter of time for Oracle to make the move. I just never expected it to be so soon.

Obviously people are asking "what now?", and the web is filled with speculations and analysis. So here is my take.

From my point of view, Oracle just made one of its best acquisitions of all time.

First of all, they have Solaris and ZFS (and the corresponding teams). Solaris is the OS where the Oracle RDBMS runs better, and ZFS is THE best filesystem to date. We can expect Oracle to take advantage of having the three development teams (RDBMS, Solaris and ZFS) working at the same place to make the RDBMS take full advantage of the Solaris/ZFS stack.

Combine a Solaris/ZFS-optimized RDBMS, the low-power/low-heat Blade servers and Sun storage offering, and you get a killer box for all database needs. All under the Oracle brand. This, by itself, is worth the $9.5 a share that Oracle paid, and positions it on par with IBM.

As a side note, the Solaris/Oracle on Sun servers is a quite common configuration, so Oracle is also expanding the offering to its existing customer base (meaning more money flowing in the Oracle direction).

Then, we have Java. A language, a platform, that is a monster by itself. No other platform beats its ubiquity (yes, not even Windows, if you count the smart phones).

Java is at the center of Oracle's middle-ware strategy. The possibility of IBM controlling Java may have been the trigger for Oracle to pick up the ball and buy Sun less than a month after the IBM-Sun deal was broken.

But, what Oracle did exactly bought regarding Java? The brand, surely. But does it really matter? Not much. Google is already distributing Java that is not Java in Android and Google Apps.

What else? A permanent seat on the JCP? That is also a nice thing to have, as it has veto power over the features of Java The Language. But Oracle itself has proposed that the JCP should be an "open independent vendor-neutral Standards Organization where all members participate on a level playing field", that "veto power" may disappear.

And the code is "free" as in both "beer" and "speech": all you need to do is go to the OpenJDK project, take the code, fork it, and you have your very own Java as long as it complies with the Java Language Specification and passes the TCK (the Java Technology Compatibility Kit).... wait...

Here comes the issue, why Oracle didn't want IBM to get complete control of Java: Sun controls the IP of Java, and only grants it to a third party implementation if it passes the TCK, which is freely available to everyone but will poison the license of any code that is tested under it to make it non-OSS friendly. Yes, this means that the resulting code cannot be released under Apache, GPL, LGPL, BSD or any other other OSI approved license. Also, a TCK code can only run on non-secluded PCs, ruling out servers, cellphones and PCs in booths and kiosks.

Do you want to make an implementation of Java, claim that it is Java compatible and distribute it? Pay Sun for the commercial use of the TCK. IBM and Oracle did this.

The latest Sun stunt on Java was to announce the release of the JDK 1.7 without a JSR (Java Specification Request), which means releasing a version of Java without a language specification or TCK, the two components necessary for an independent implementation, this effectively blocked all non-Sun Java implementations from upgrading to JDK 1.7. Who where the two most affected companies by this stunt? IBM and Oracle, the only two serious alternative JVM implementors.

So, what Oracle actually buys from Sun is the Java IP. They can now upgrade JRockit to the next Java version without needing a language spec or a TCK, and claim it is a Java compatible implementation, because now that they own the IP they can call a "Java compatible implementation" anything they feel like it.

This puts them in a very unique position: Either they stay true to what they wanted to do on December 2007, creating an external standard body for Java and giving the TCK for free and without ANY licensing burden, OR they can continue the Sun strategy and release the JDK 1.7 without a TCK, which could hurt IBM's middle-ware business.

As a final note, the lack of IP on a "Java" implementation, even if it does not claim to be Java (like Project Harmony) may not seem very important to us mortals. But it is critical to corporate lawyers. For a more detailed analysis of the Java IP, how it is acquired by third parties and how it may be a risk, please read these posts:

Tuesday, April 21, 2009

Welcome to Soronthar -- Our third contributor

I was having a conversation with one of my friends who is an excellent technology commentator about the Sun Microsystems acquisition by Oracle, and since he is extraordinarily knowledgeable about Java, I encouraged him to publish his very interesting insights about the triple interplay between Oracle, Sun and IBM around Java that perhaps drove the news we are commenting today. We should expect his article to appear soon.

His name is Soronthar, and he will become the third author contributing for this blog. Quite an impressive lineup.

AMD's report: "Flesh wound!"

The title refers to Monthy Python's "Holy Grail", of course. I mean that AMD is pretty much in a terminal process, and the story giving the rounds is that AMD beat the expectations by losing "just" 66 cents per share, or 1/5 of the share value lost in a quarter...

Now, I must sort of apologize. I called repeatedly the multi-year delay in providing details for the "Asset light/smart" strategy mere bullshit; because we all knew the terms of the license prevented AMD from not manufacturing the vast majority of their chips. It turns out that it can be argued that secrecy was necessary in preparation to actually break the license. This is sort of an example of the terminal desperation AMD is in.

It may get away with it, though. It is not clear to me whether Intel prefers a dead AMD or an AMD in torpor.

Again, investing in AMD is crazy, it doesn't matter how, because AMD is the football everyone is kicking around according to their non-public interests.

Farewell to Sun Microsystems

Some quick blogging about Sun and Oracle:

The first time I blogged here about Sun it was to criticize their lack of coherence: They had this market prong of Java which commoditizes the computing platform, and at the same time had the "boutique" Sparc hardware, along other things that I called a "multiple personality complex" trying to be open and proprietary at the same time. Nevertheless, Sun came a long way during these 3 1/2 years. They at Sun kept capitalizing on opportunities thanks to a practical approach: They deepened their AMD Opteron offerings, early in the cycle of Intel's Core architecture they began to also offer Intel without de-emphasizing their Sparc offerings. They kept opening their businesses, launched --finally!-- an Open Source version of Solaris, allowed Java to become ever more free, continued providing support to OpenOffice, gave the reins to "Mr. Open Source CEO" Jonathan Schwartz, acquired MySQL and VirtualBox. I was very optimistic about the end result of all of this, and wrote a blog about it which I recommend to the dear reader; in summary, all of this openness and reliance on Open Source enlarge a market for the products of Sun, and allows the participants in that market to move faster than the industry. This success was assured by the history of IBM's embracing of Linux and Sun's very Java; and although Sun was very late to that game, it still wasn't too late.

A little before the acquisition of MySQL I had already taken a small bullish position on Sun. My intention was to accumulate over a period of three years, with a lot of patience at the beginning acknowledging that the traditional businesses of Sun were in shambles, without any clear prospect of re-vitalizing them, but I wanted to get early due to my conviction about the results of the evolution that was (is) undergoing. The plan of selling covered calls wasn't losing although the price was declining, until the crash. This crash zapped my conviction on Sun because with a bad economy the prospects of a struggling boutique shop had to include bankruptcy, so, I didn't accumulate, but neither sold.

Then came the news of the IBM acquisition, that made little sense to me. At this point, I got tempted to sell, to perhaps buy back after the bubble bursted, until I heard that the Sun board had rejected the IBM offer. I reasoned that the board probably knew what they were doing, perhaps there could be a better option for Sun down the road, and decided to wait. Then, I got to know that IBM also thought it over, and as a financial journalist said, they were not willing to undergo the "financial proctological exam" of the regulatory agencies to approve the merger. By the time of the Oracle announcement, I thought I had screwed it again, losing my best chance to get rid of what I had of Sun; but that wasn't the mistake I made, I should have observed that the market itself had merged Oracle and Sun (almost all of my customers who run Oracle run it on top of Sun, anyway, the correlation is undeniable), and I should have remembered the Dvorak argument about Oracle killing MySQL using Sun as a proxy. Further examination about Sun's leadership at initiatives such as the computing grid are an strategical theater of operations that Oracle has been slow to position itself at. With's EC^2 (Elastic Computing Cloud) and all of those other cloud initiatives taking hold, Oracle needed something powerful to help them succeed at their belated entry in that space.

This acquisition makes a lot of sense to me. The financial journalists have already discussed the obvious reasons why Oracle has a relatively easy task of making this acquisition work; just the advantages to supply truly integrated platforms to customers is enough to justify this acquisition, but at deeper strategic reasons the acquisition makes even more sense.

The really interesting question, that I dare not forecast about, is what is going to happen with MySQL, Java, OpenOffice, and VirtualBox; depending on how you look at it, MySQL and VirtualBox either cannibalize pre-existing Oracle businesses, or represent entries into markets that Oracle is not strong at today, so, it's difficult to forecast in what direction would Oracle ultimately move. About Java, I don't see whether Oracle will treat it with indifference (dis-investment) or would try to steer it towards helping some strategic initiatives. About OpenOffice, I am curios to know if Oracle really wants to intensify the war against Microsoft's sacred cash cows. Open ZFS, Solaris and Solaris are clearly valuable assets that would continue to help Oracle given their orientation towards high end performance, the segment at which Oracle wants to remain as strong as ever. All of this lack of clarity prevents me from transferring my shares to Oracle, but furthermore, I think Oracle suffers from a condition that makes me abstain from taking bullish positions: Oracle does not operate in a market at which the common people will eventually become customers, but only a high-end that it is not clear to me that it will even continue to exist. This is like nVidia: Good company and all, they began doing 3D accelerators for a high end segment of the market that was bound to become mainstream in due time; and it became mainstream, and nVidia became a major player in the industry. But today, its market segment is shrinking to the very few people who require absurdly high computing capabilities, therefore it is very risky to get into bull-side.

Finally, this acquisition provided me with something to hunt for in the stock market: technology companies that are struggling and the market has merged its products to those of much stronger companies, mergers may be happening.