Sun/Oracle Deal Remakes The IT Landscape

by Eric Savitz
April 20, 2009, 1:10 pm

This morning’s news that Oracle (ORCL) had agreed to buy Sun Microsystems (JAVA) has implications for a host of companies in the IT technology sector; the deal also raises a variety of so-far unanswered questions. Here are some of the things you ought to be thinking about in the wake of the proposed deal.

Combined with Cisco’s (CSCO) recent move into the sector, the market for servers continues to get increasingly competitive. All of a sudden, Hewlett-Packard, IBM and Dell find themselves facing Cisco and Oracle. This can’t possibly be good news for HPQ, IBM or DELL.
There’s is speculation that this could lead to a new wave of vertical consolidation moves - in particular by, natch, HPQ, IBM and DELL.
Among the potential targets, according to Deutsche Bank’s Chris Whitmore, are NetApp (NTAP), EMC (EMC), Juniper (JNPR) and Brocade (BRCD).

While regulators will likely take a close look at the deal, the combination not does carry the same concentration of power that an IBM deal with Sun would have involved. Stifel Nicolaus regulatory analyst Blair Levin writes today that the deal is likely to be approved, since “it does not reaise the issues regarding consolidation in the server and and storage markets that would have been problematic for a deal with IBM.”
This sure feels like a big deal - you can bet there will be a big banner headline in tomorrow’s San Jose Mercury News - but it is only the third-biggest for Oracle. The company paid $8.5 billion for BEA Systems, and $10.3 billion for Peoplesoft. This is the company’s first big deal since the $3.3 billion purchase of Hyperion in 2007. (The Sun deal is worth $7.4 billion, or $5.6 billion net of cash and debt.)
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http://blogs.barrons.com/techtraderdaily/2009/04/20/sunoracle-deal-remakes-the-it-landscape/

 

1) Technology-related mergers tend to be deflationary.
2) Oligarchization of industry sectors tends to be bearish.
3) Larger-scale mergers, whether in bull or bear markets, tends to be a bearish development.
4) There's nothing to be "excited" about with that deal, unless you are longer-term bearish. We'll see.

 

Your thesis is baseless.

 

How is doing more of the same that big conglomerates of IT have been doing so long is remaking the IT landscape? What is new about big IT companies that create nothing, instead only buy up talent and working products and selling them to their customer base anything novel? Sounds like a lot like marketing regurgitation.