Sun Sparc's future unclear under Oracle

Company bought Sun for its software, analysts say

Oracle has stated it was Sun Microsystems' software business that made it want to buy the company, raising significant questions around the fate of Sun's hardware business, analysts say.

Oracle says it was most interested in the company's Solaris OS and Java software. The company plans to build soup-to-nuts systems that combine Oracle's database, middleware and applications with Sun's operating system and hardware.

"Engineering the Oracle database and the Solaris OS to work together allows us for the first time to deliver complete, integrated computer systems, from database to disc," said Larry Ellison, Oracle's CEO during a conference call.

Whether the hardware it offers will include Sun's proprietary Sparc-based systems was unclear, however, and analysts wondered whether Oracle would support them over Sun's x86 servers in the long term. Sun's Solaris OS is available for both Sparc and x86-based systems.

The industry will have to wait and see what Oracle does with Sun's hardware business as the deal unfolds, says Jim McGregor, chief technology strategist at analyst firm In-Stat.

Sparc's market share has been falling to rival Unix server vendors like Hewlett-Packard and IBM, giving Oracle more incentive to cut the development of Sparc or sell off the business, he says.

"A lot of these [Unix] products have been withdrawing to smaller and smaller areas like high-performance computing. It doesn't make sense for too many companies to continue with those architectures. Look at companies like Silicon Graphics and Cray, all these guys have just moved to what's off the shelf," McGregor says.

Oracle executives have declined interview requests to discuss the deal. In the conference call after the announcement, CEO Larry Ellison implied that Solaris is more important to Oracle than Sun's Sparc chip. "Sun's largest business is its Sparc Solaris computer business, and the heart of that business is the Solaris OS," he said.

Oracle has already built high-performance servers with Hewlett-Packard for data warehouses based on industry-standard hardware. With Sun, it can see other opportunities to build such systems.

"Sun's open storage platform is very similar to Oracle's Exadata storage platform. Both use standard servers, commodity disks and InfiniBand interconnects to lower the cost of storage while improving performance," said Oracle president Charles Phillips.

Oracle is a big company and can afford to jump into the hardware business, but Sun's most valuable asset to Oracle is its software, McGregor says. "I won't say it's not a good opportunity, but being in the hardware segment is probably not the best opportunity for Oracle."

The question is whether Sparc offers enough advantages to Oracle to make continuing its development worthwhile, he says. The market for specialised chips like Sparc has been slowing as companies move to industry-standard servers running on chips from Intel and AMD, McGregor notes.

Oracle would be unlikely to stop developing the Sparc chips right away, and may continue to offer systems based on the processor, says Dan Olds, principal analyst with Gabriel Consulting Group. Sun has already slowed its own Sparc development as the company lacked resources to keep up with rivals Intel and IBM, he says. Sun has already outsourced some of Sparc's development to system vendor Fujitsu.

Though it is too early to say for sure, some analysts believe Sun could spin off or sell the chip assets.

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