Why did Sun buy MySQL?

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Why did Sun buy MySQL?

B1_msql_announcementr_3
Sun Microsystems, Inc. (NASDAQ: JAVA) today announced it has
entered into a definitive agreement to acquire MySQL AB, an open source icon
and developer of one of the world’s fastest growing open source databases for
approximately $1 billion in total consideration. The acquisition accelerates
Sun’s position in enterprise IT to now include the $15 billion database market.
Today’s announcement reaffirms Sun’s position as the leading provider of
platforms for the Web economy and its role as the largest commercial open
source contributor.” from the Sun Press
Release
on the acquisition.

Let’s start off with
the easy Q&A. Why did MySQL sell out to Sun for $1 billion? $1 billion,
that’s why. MySQL was planning on an IPO this year but must have thought that a
sure $1 billion now is better than the IPO would produce. It’s great when you
hear a software company’s CEO say that they are planning on remaining
independent because it is best for their customers and then later, maybe just
weeks alter, announce they are being acquired by a high-tech titan and of
course say how wonderful it is for their customers. Don’t give me
corporate-speak, it’s “Show me the money”.

But why did Sun buy
MySQL? More precisely, how do they get a business ROI from the $1 billion
purchase? Sun says there will be synergies with people buying MySQL (of that’s
right you get it for free) and then figuring they should buy Sun stuff. Well
maybe they’ll pick-up Solaris and Java (they’re free), but Sun hardware? That’s
a $1 billion dollar “lose leader”!

Sun did not buy
MySQL for its $100 million in sales and no profit. Do they think that if they
own MySQL that they’d get more revenue for the product? Will those college
students, bloggers and Web 2.0 folks give Sun money that they didn’t give to
MySQL? Earth to Sun, these people wanted a free product.

John Dvorak’s in his commentary today on MarketWatch “The
Sun-MySQL deal stinks”
states “Sun Microsystems Inc. gobbling up MySQL is
perhaps the worst single event I have ever witnessed in the history of tech
mergers and acquisitions. The move, announced earlier this week, is potentially
a disaster for the entire sector…” John further states “So who is the real
beneficiary of this deal? MySQL is a genuine nuisance to Oracle (ORCL).
I’m close to being convinced that Oracle wanted to buy MySQL to kill the
product, but knew that it couldn’t pull off the stunt itself. It would be too
obvious, especially to European Union regulators. So it sent in a stooge to do
the job.” Conspiracies are nice to talk about (and John was just joking, sort
of) but Sun did it all on their own.

I like MySQL as a product especially for the price. I like
Sun and it used to be the “cool” company like Apple is today. I would recommend
that Sun should get more into software but they should consider acquiring
products that generate a profit. Just a thought. Other hardware-oriented
high-tech titans, such as IBM (IBM),
EMC (EMC) and Hewlett
Packard (HPQ), have moved
aggressively into software they purchased firms that make a profit. Sun may now
have bragging rights to being the largest aggregator of open source software in
the world and own an open source database that, as the PR materials state, is
“…actively used by virtually every Web 2.0 and e-commerce company in existence
today” but it would be nice for Sun “show me the money.”

Why did Sun buy MySQL? Please tell me, I
really want to know.

7 Comments

  1. Erek Dyskant says:

    I talked about this a bit in my blog, although I was a little less harsh on Sun than you are.
    I think that the reasoning is twofold. First of all, MySQL’s customer list: Baidu, Google, Facebook, Dunn & Bradstreet, etc. These are just the sorts of customers that Sun would love to have and doesn’t. By owning MySQL, they are buying ins to that portfolio, and can steer the MySQL companies towards using Sun hardware and consulting.
    Second, Sun backs a lot of high end systems (foreign exchange, high value web sites, various bank systems) with the different java incarnations. However, those uses for java are just the things where the database backend goes to Oracle. This means that for every java customer they pick up, a whole lot of that customer’s budget and mindshare ends up shipped over to Oracle.
    While you mentioned that java is free, enterprise java customers still make Sun money through consulting and support, as very few high stakes companies would run purely the free license of java (especially when java is closed source) without any contact with its developers. Similarly, if they can get Oracle out of the equation for the database backend, they will be able to monetize on MySQL in the largest installations.

  2. Sun owns MySQL...Sun will own all says:

    Take a look at the comments on the story you linked for more if you need it. I think you jumped on the wrong bandwagon.

  3. Anonymous says:

    Erek, Thanks for your very thoughtful response. Both your comment and blog post provide good reasons for the acquistion. But I still go back to the question of whether MySQL is worth $1 billion in relation to the acquistion’s ROI. Google, Microsoft or Oracle can afford to overpay but most others cannot.
    Did Sun need to buy MySQL or partner with it to get the desired results?
    Should Sun acquire some software companies or consulting firms that have terrific customers and make a profit? Those acqusitions would produce solid ROIs and support strategic directions.
    There is a story, I think it was in the excellent book “The Soul of a New Machine”, where a hardware company built a server and was selling alot of them. It turned out that when the company discovered they were losing money on each machine they sold a senior VP said that was okay because they would make it up in volume. The laws of business do not change because a technology is cool. In the long run you need to make a profit.
    There are worst things in business then overpaying for an asset as long as it has quality. MySQL is a quality product.
    Sun, though, needs to make a bolder move.
    Thanks,
    Rick

  4. Alex says:

    In my opinion it was a very smart step from Sun’s perspective. Starting from the point they own MySQL they can provide their customers a full stack of applications needed to run and support web-site, business application, etc, starting from hardware and up to the web layer including security/access rights management.
    Another point here is that Sun is promoting Solaris. Imagine they are able to provide a really good MySQL integration with Solaris: having ZFS,zones and other cool things Solaris can win a huge part of the public web hosting market which is a great opportunity for Sun,

  5. Rick Sherman says:

    Alex,
    You are absolutely correct as to the benefits: MySQL provides “…a full stack of applications needed to run and support web-site, business application, etc, starting from hardware and up to the web layer including security/access rights management.” and Sun can integrate Solaris and MySQL to leverage each other more fully. BUT I am still asking the “numbers guy’s” question “show me the money!” Where is the business return-on-investment (ROI)? How many years before the $1 billion dollar investment breaks even?
    There have been a lot of high tech companies with great tech stacks that became has-beens or, even worse, washouts. Some would argue that has already become Sun’s fate but I don’t think that has to be the case. But bold moves are necessary. Apple brought back its CEO who then gave us the iPod/iTunes (and even cooler Macs.) Apple went from has-been to darling. That happened because its tech was cool and it made a lot of profit. IBM became a rejuvenated titan by expanding its consulting legions and then its software business. This was after many people wrote IBM and its mainframe business off as dinosaurs.
    Being king of web app stack and open source is cool but is it profitable especially in relation to Sun’s size or its former glory? I like Apple and have enjoyed their comeback. My engineering degree gets me to like Sun but my MBA keeps asking for the breakout strategy (with sales and profits.)
    Rick

  6. Congrats for Original BI vendors because they are faced with the challange to understand ERP (SAP) and wider application offering (IBM).

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