Transcript Recognizing Lock-In

Oracle-Sun Acquistion
Hal R. Varian
SIMS
IBM-Sun
• IBM-Sun
– IBM announced Sun deal at reported value
of $9.55 share = $7 billion on April 3
– After legal review, reduced it on April 5 to
$9.40
– IBM concerns: change of control contracts
– Sun concerns: “hell or high water” clause
– “Sun is damaged goods.”
SIMS
Oracle-Sun
• April 21 Oracle announces Sun
acquisition at $9.50/share
– $260 million break up fee
• stock price
• What are implications?
SIMS
Analysis
• Complements
– Hardware (servers) + software (database)
• Database appliance
• One stop shopping
– Application (database) + middleware (Java)
– OS (Solaris) + application (databse)
– High end database (Oracle) + low end
database (MySQL)
SIMS
Antitrust
• Merger of complements usually not an
issue; IBM was a bigger issue
• Sticking point: MySQL
SIMS
Pricing
• Versioning?
– Low end database transition to high end?
– Open source could be an issue
• Built in customer list
– Differential pricing a big deal
– Use MySQL to compete with SQL server?
– Build product line?
SIMS
Bundling
• ELLISON: 'Microsoft was a latecomer to word processing,
which was dominated by WordPerfect. It was a latecomer to
spreadsheets, which was dominated by Lotus. Microsoft
was late to graphics, dominated by Harvard Graphics, and
late to desktop database, which was pioneered by AshtonTate/dBase. So what happened to all these companies?
They vanished, because everyone wants all the pieces
linked together, and they buy Microsoft Office.”
–
http://www.americanwaymag.com/oracle-corporation-larry-ellison-microsoft-e-business
SIMS
Lock-in
• Fairly high switching costs for corporate
database
• Switching costs increased by bundling
• Can build middleware to database links
with Java expertise
• Oracle in position to reduce switching
costs for MySQL customers
• Want to offer system integration services,
but this is tricky due to best of breed v
integrated solution
SIMS
Economies of scale
• Supply side
– Large development costs as with any
software
• Demand side
– An “industry standard”
– Developers build applications on top
– Communication links via middleware
SIMS
Competitive landscape
• Other database companies (EMC,
Sybase, etc.)
• SAP: Oracle's longtime rival
• IBM: former suitor
• Microsoft: OS? Database?
• Cloud computing?
SIMS