I understood IBM's attempt to scoop up some talent and market share in the form of the ailing and faded server vendor.
However, I confess to having little understanding of what cogent business reasons Larry Ellison has to buying a hardware vendor.
It can't be for the Sun software, as that could easily be licensed, or bought more cheaply in bankruptcy. But Oracle isn't a hardware vendor.
The nearby, Yahoo-sourced chart shows just over 30 years of equity price performance of the two firms, along with the S&P500 Index. It's quite impressive to see that Sun was almost Oracle's performance equal as recently as nine years ago. But tech's demise in the next few years proved too much for Sun.
While, in retrospect, Oracle has a surprisingly monotonic trend, with the early 2000s as an exceptionally positive bubble, Sun's equity price fell as fast as it had risen.
Perplexingly, on-air staff at CNBC were crowing about how this merger shows that the technology sector may be leading the economy out of recession, and had virtually nothing negative nor questioning to offer on the deal.
Here's my sense of this deal. Just in case 'cloud computing' requires vertical integration, Larry Ellison wants to own a server manufacturer. I think that's about it.
After all, Ellison and Oracle have no hardware manufacturing or design experience, to my knowledge. How is the firm supposed to do better with Sun than the ailing firm's own experienced managers? Sun may have made some strategic mistakes, but one assumes they at least know how to crank out the boxes they built.
What is Oracle going to add to that? I suppose there may be some sort of administrative cost savings. But these types of diversifying moves generally result in the acquirer being spread rather more thinly, and sometimes even losing focus on their main business, while trying to avoid losing more money on the acquisition.
The reports on CNBC had Oracle claiming that the Sun acquisition will be accretive to earnings relatively quickly. Of course, that claims rests on assumptions and business plans which were not divulged along with the claims.
Common sense tells me this is not the best move for Oracle. But, of course, time will tell.
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