Sun's MySQL Buy Targets Oracle, Microsoft

Sun Microsystems set the stage for a heavyweight database battle with one-time close partner Oracle and longtime rival Microsoft with its $1 billion acquisition of open source database kingpin MySQL AB.

Sun CEO and President Jonathan Schwartz said the purchase puts Sun at the heart of the "$15 billion database market." He called it "the most important acquisition Sun has made in the history of the company."

Schwartz said the deal brings an "enormous wrath of new customers and opportunities" to Sun, including the prospect of increased margins for itself and partners as companies buy Sun servers and storage as part of a full MySQL solution. Sun indicated that it will move quickly to optimize the MySQL database on Sun servers and storage devices.

"You may have noticed that when MySQL is put into deployment it is often surrounded by application infrastructure and identity infrastructure and there is a 100 percent attach rate also to a server and a storage device," said Schwartz. "Databases are used to store information as well as to run analytics and deliver applications. As we build out those businesses, it improves the economics of our overall business as well as expands our service line."

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"This is really all about one thing, which is reaffirming Sun's position at the center of the Web," said Schwartz. "We view ourselves as a platform for the Web economy."

Sun executives claimed the deal will not affect the Oracle relationship or even Sun's longtime endorsement and support of the open source PostgreSQL database.

Rich Green, executive vice president of software for Sun, who will oversee the MySQL business, downplayed the competition with Oracle. He said Sun has spent many years in partnership with Oracle with hundreds and hundreds of engineers that work with Sun to optimize the Oracle database on Sun servers. "We are going to keep investing in that and keep doing that," he said. "It is vital to our customers. It is vital to our business, but we can also use that expertise and share that expertise to optimize MySQL technology to run on Sun systems as well as Linux and Windows systems."

As for the PostgreSQL conflict, Schwartz noted Sun's position as "one of the earliest backers" of PostgreSQL and reaffirmed Sun's commitment to that open source product. "We believe in the future of open source databases so much so we just put $1 billion behind one of them," he said. "We are firmly committed to figuring out the ways we can optimize and integrate innovations across the two communities, bring the benefits of scale and platform proliferation to both communities. We clearly see the future of the database market being in open source."

NEXT: Solution Providers Debate The Merits Of The Deal

Some solution providers hailed the deal for its potential to accelerate open source adoption in large enterprises, while others cautioned that Sun could end up slowing MySQL's current market momentum.

Greg Faubert, president and CEO of Libonia, Mich.-based MySQL reseller MessageWay Solutions, says he views the acquisition as a "net positive" for MySQL and the open source community. "I think ownership by Sun Micro is going to have an accelerating effect on adoption," he says. "Sun is a highly established and legitimate force in the high-tech business."

Faubert says he understands how some resellers might fear being overlooked by a large corporation like Sun, by feels those trepidations are misplaced. "From our vantage point we look at Sun as very experienced in the open source community," he says. "They understand how to run that kind of an enterprise. I don't view it as threatening at all."

Rob Hart, business development director of Data Technique, a systems itnegrator based in Overland Park Kansas, however, said he was "disappointed" that Sun is taking control of MySQL. He said he was concerned that Sun would take a "highly successful, highly proven open source database and commercialize it."

"We use it a lot and so do our customers," he said. "And I can't really recall there being a whole lot of support issues with it," he said. "It seems to be very scalable and accepted the way it is."

"If it goes from being supported by the entire user community to commercially supported by one company that could slow development and it could definetely slow adoption," said Hart, noting it would be a different story if the product was having trouble getting "momentum or traction" in the market.

Hart said open source technology made up about 20 percent of the projects he worked on two years ago and now it is up to 40 to 50 percent. That doesn't bode well for either Oracle or Microsoft.

"Open source is often looked at as technology that can be used in a project as opposed to a turnkey solution from a commercial ISV," said Hart. "A lot of times companies aren't looking for a turnkey solution. They are looking for something to fit in with their existing infrastructure and applications. And they just need that missing component. They don't want to rip and replace things they have already developed in house. That's the flexibility of open source."

Even as solution providers debated the merits of the deal, Sun and MySQL executives moved to reaffirm their commitment to MySQL partners.

Green said the robust MySQL channel was one of the characteristics of the open source database company that made it so appealing to Sun. "It is absolutely a critical part of the plan to continue to grow those relationships," said Green. "We in no way plan to go it alone in terms of supporting customers." At the same time, he said Sun will move to leverage its existing hardware and service provider base along with its own professional services organization.

MySQL CEO Marten Mickos, will be joining Sun's senior executive leadership team reporting to Green, said the deal is a big plus for the company's 1,000-member existing partner network, which runs the gamut from nimble Linux solution providers to industry giants like IBM, HP, and SAP. "This will give them more power behind what they are doing and more access to the market," said Mickos.

As part of the deal, which is expected to close in the March-April time frame, Sun will pay approximately $800 million in cash in exchange for all MySQL stock and assume approximately $200 million in options.

One Wall Street analyst estimated that MySQL's trailing 12-month revenue is about $68 million, with profitability at break even. Sun, for its part, would only say the deal is is expected to be accretive to Sun's fiscal 2010 operating income on a GAAP basis. MySQL is headquartered in Cupertino, Calif., and Uppsala, Sweden and has 400 employees in 25 countries

The deal still faces regulatory approval and other closing conditions. Sun said once it is completed, MySQL will be integrated into Sun's Software, Sales and Service organization. In the interim, Sun said a joint team with representatives from both companies will develop an integration plan.