Wall Street Takes Rumors Of Oracle Bid For EMC Seriously

An Oracle bid to acquire storage vendor EMC remains a rumor for now, but the possibility is being taken seriously by Wall Street, where investors drove EMC share prices up more than 4 percent Thursday.

Oracle has been rumored for some time to be interested in acquiring a storage vendor in the wake of its January acquisition of Sun Microsystems. Sun brought Oracle a strong server technology but a weak storage business despite its preacquisition introduction of the widely acclaimed Storage 7000 Unified Storage Systems, also known as Amber Road.

The acquisition of EMC, combined with the hardware-software stack being built using Oracle software and middleware and Sun hardware, would give Oracle a healthy bump in its data center presence and make its combined hardware-software stack a more formidable competitor in the converged infrastructure market, which is currently dominated by Hewlett-Packard's Matrix and Cisco's Unified Computing System.

Converged infrastructure refers to tying server, storage and IP networking into an integrated solution in order to give customers a single vendor source for building data centers that can be used for a variety of applications including services and cloud computing.

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Such an acquisition also would give Oracle control of VMware, enabling it to go head-to-head against Microsoft in the virtualization and operating system markets. It also would give Oracle a big presence in the security market, thanks to EMC's RSA offering.

NEXT: The Domino Effect

Should Oracle actually acquire EMC, it could erupt in a domino effect of similar acquisitions among other tech vendors, said Ken Male, founder of TheInfoPro, a New York-based research company.

Oracle really wants to take on HP and Microsoft, and the acquisition of EMC would give it the ability to do just that, Male said. However, such a move could trigger a number of other acquisitions.

For instance, Cisco and/or IBM might want to make a bid for NetApp. Cisco sees an interest in EMC because of the VCE coalition, which brings technology from Cisco, EMC and VMware together in their Vblock storage solution. However, NetApp is also working closely with Cisco, making a Cisco bid for NetApp a strong possibility if EMC was acquired, Male said.

It could also trigger a bid for NetApp by IBM, which currently OEMs and resells almost all of NetApp's product line. However, Male said, IBM is doing well with its XIV acquisition and is doing a lot of internal storage development, and so may not be as interested in NetApp as Cisco might be.

An Oracle acquisition of EMC would also see a scramble of other vendors reacting to Oracle's newfound control of VMware, Male said. For instance, he said HP or IBM might then make a bid for Red Hat as a way to get control of that company's hypervisor and Linux technology, which would then possibly see Microsoft, IBM, HP or Cisco bid for Citrix, he said.

NEXT: Can Oracle Afford EMC?

An acquisition of EMC would not come cheap. Given its 4-plus percent rise in share price on Thursday due to the buyout rumors, EMC currently has a market capitalization of more than $43.4 billion.

It also would cost at least $50 billion in cash and stock issuance, according to The Wall Street Journal.

It's a situation that is hard to "crystal ball," Male said. Oracle has recently increased its line of credit, and Oracle Chairman Larry Ellison has hinted at interest in NetApp and EMC, he said.