Was MySQL Worth $1B to Sun?
By Richard Koman (Thursday, January 17, 2008)
Sun Microsystems' purchase of MySQL for $1 billion is not only the largest open-source deal yet, it's almost bigger than all previous open-source deals combined, including RedHat's $326 million buy of JBoss, Citrix's $500 million purchase of XenSource and Yahoo's $350 million acquisition of Zimbra.
But the deal raises a number of questions for Sun. Was that $1 billion well spent? What will Sun do with its new database? And will the purchase improve its standing in the enterprise?
While it will take several years to see the ultimate value of the acquisition, Sun may well have overpaid, Charles King, principal analyst with Pund-IT, said in a telephone interview. "To paraphrase Sen. Edward Dirkson, a billion here and a billion there and pretty soon you're talking real money," he quipped.
Can Sun Execute?
"It seems $1 billion was a fairly steep price [for Sun] to pay for the amount of revenues MySQL is generating," King said. More important than the $1 billion price tag, however, is whether Sun can execute its "strategy of taking a database that's popular in certain circles and successfully move it into the enterprise accounts, where they are a well-respected vendor."
"Supporting our overall growth plan, acquiring MySQL amplifies our investments in the technologies demanded by those driving extreme growth and efficiency, from Internet media titans to the world's largest traditional enterprises," Jonathan Schwartz, Sun CEO and president, said in a press release Wednesday.
It's All About Middleware
Whatever technical issues Sun may face in integrating MySQL into its current stack pale in comparison with the marketing challenge, King said. "In the scheme of things, the most important IT issue for large businesses is reliability. For databases, companies need to know product is solid, can scale and won't go down if they make severe demands on it."
On the nuts-and-bolts side, integration will take some time, King said, as Sun and MySQL engineering groups get in sync; MySQL gets certified within Sun's product lines; and Sun informs customers that the new database is "fully capable of performing well with the company's hardware and software stack."
While much has been made about MySQL's open-source model -- MySQL CEO Marten Mickos said the deal validated open source as a "superior way of building software and developing a business" -- King said Sun's interest in the company was "less about open source than developing a stronger middleware and services organization." Realizing the importance of the database to growing numbers of businesses, Sun opted to buy its own offering rather than partnering with the likes of Oracle, he added.
Long Way To Go Against IBM, Oracle
Sun is a company "fundamentally evolving from a hardware-centric vendor to more software- and services-based," King said, and it is competing against both Oracle and IBM. Big Blue represents the "gold standard" in this market, King said, combining "a very powerful middleware stack and solid, market-leading hardware as a way of energizing their services organization."
On the other hand, Oracle's successful bid to purchase BEA Systems gives it a "fundamental piece of the middleware stack they lacked until now," King said. While Oracle has been "growing its business software products like crazy," the purchase of BEA allows Oracle to promote itself as the "holder of the key to the middleware structure for the applications" -- and to compete more effectively against IBM.
Under Schwartz, Sun has come a long way in the past year but the company is "still a work in progress," King noted. The MySQL deal is not a "breakout acquisition" but more of an incremental step, he added. "MySQL has a long way to go to compete against DB2 or Oracle. The benefit to Sun will play out over time."
Originally appeared in News Factor Network and Yahoo.