Sun Microsystems customers stew in limbo

IT shops that use Sun Microsystems hardware are tired of waiting for the Oracle acquisition.

IT pros running Sun Microsystems gear are mostly just tired of waiting. They want Oracle's still-pending buyout of Sun to happen as quickly as possible.

"Clearly the sooner the acquisition clears regulatory hurdles and is finalized the better," said Matthew Leeds, the vice president of IT operations at Gracenote, a digital media software company. "Uncertainty is very destabilizing for Sun and its customers."

The antitrust waiting game
And yet the waiting -- and the uncertainty -- continues. This week, the European Commission (EC) laid out its concerns about Oracle owning the popular MySQL database as well as its own market-leading proprietary database. MySQL is owned by Sun and would be part of the buyout.

This news comes six months after Oracle announced its acquisition plans. Sun shareholders approved the deal this summer, and the U.S. Department of Justice signed off in late August. Only the Europeans remain to be convinced.

Despite "repeated requests" from EC officials, reports indicated that Oracle hasn't addressed criticism that acquiring Sun and MySQL is an antitrust issue.

Oracle stuck to its guns, posting a statement Monday saying there are eight competitive database players including IBM, Microsoft and Sybase and "three distinct open source vendors."

The EC could still sign off on the deal, but now Oracle must respond to its concerns, and that likely means more delay. A final ruling had been promised for mid-January and then there is an appeals process.

Confusion hurts Sun
One large IT consultant in the Midwest said a few of his Sun customers moved Sun business to HP or IBM servers in the past year, but that most remain solid Sun accounts. "They've been holding off on upgrades, but at some point, they've got to update their gear. And if this drags out, they will consider something else," he said.

Loyal Sun customers were distressed to read reports that the company ditched development of its Sparc-based "Rock" processor and said it plans to cut 3,000 jobs in the next year. All that news highlighted Sun's financial difficulties since its dot-com heyday.

A large Chicago-based financial services firm runs quite a bit of StorageTek tape and some Hitachi disk storage [OEMed by] Sun. "We are watching this [regulatory] process closely, as we may have tape requirements next year. We have some MySQL but could get third-party support for that easily," said the CTO of the company.

He added that he is interested in the Oracle-Sun Exadata machine as a self-contained compute system for high-performance applications.

Along with many others, this IT professional said the company has been watching Sun well in advance of the Oracle bid because of concerns that it would not be around for the long haul. Should the deal finalize, Oracle's financial might alleviates some of that concern.

Clearly, the financial news has not been good. For its most recent quarter, ending Sept. 27, Sun reported that total revenue fell $747 million or 25% from the year-ago period. Systems revenue fell $577 million, or 33% and services revenue dropped $170 million, or 14%.

In a filing with the U.S. Securities and Exchange Commission, Sun attributed the weakness primarily to the economic downturn and "consolidation of our customer base, specifically in the financial services sector as projects were scaled back, delayed or canceled, in addition to the uncertainty associated with the proposed acquisition by Oracle and increased competition."

That uncertainty "adversely impacted our business across nearly all geographies and industries," Sun said in the filing.

Sun's hardware competition note weakness
Not all Sun customers have bought the adverse-impact excuse. An IT manager at a healthcare company on the West Coast said that all IT vendors have reported poor results, though he add that the longer the acquisition process takes, the weaker Sun looks.

He has a point. IBM reported a 12% revenue drop in server hardware for the third quarter. Bucking the trend Hewlett-Packard's revenue in server and storage actually rose 3%.

"It may be possible for Sun to post better results, but taking the necessary actions to do so while waiting to see if the acquisition closes is likely to be difficult," Leeds added.

IT pros said they would prefer a quick acquisition over anything else. Last in the line of their desired results was if Oracle walked away from the deal, leaving Sun to fend for itself once again.

Most observers believe that Sun would be hurt more than Oracle if the latter walks away.

Senior News Director Barbara Darrow contributed to this report.Mark Fontecchio can be reached at mailto:mfontecchio@techtarget.com.

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