Q+A-What are Larry Ellison's plans for Sun Micro?
* Oracle CEO says committed to Sun's hardware business
* Oracle to boost investment in SPARC microchips
By Jim Finkle
BOSTON, May 7 (Reuters) - Oracle Corp (ORCL.O) Chief Executive Larry Ellison shook up Silicon Valley last month when he made a surprise move to enter the hardware market by acquiring computer maker Sun Microsystems Inc JAVA.O.
Some analysts speculated that Oracle, the world's largest database software maker, actually wants Sun's software assets and that it might eventually sell off the hardware business.
Below are Ellison's comments on his rationale for buying Sun and strategy for turning around the struggling company. Ellison supplied his answers to Reuters questions via email.
Q. Why does Oracle, a company that prides itself on high margins, want to get into the low-margin hardware business? Are you going to exit the hardware business?
A. No, we are definitely not going to exit the hardware business. While most hardware businesses are low-margin, companies like Apple and Cisco enjoy very high-margins because they do a good job of designing their hardware and software to work together. If a company designs both hardware and software, it can build much better systems than if they only design the software. That's why Apple's iPhone is so much better than Microsoft phones.
Q. Apple and Cisco have shown they can make hardware and software work together. What experience does Oracle have designing hardware and software to work together?
A. Oracle started designing hardware and software to work together a few years ago when we began our Exadata database machine development project. Some of our competitors, Teradata and Netezza for example, were delivering pre-configured hardware/software systems, while we were just delivering software. The combination of hardware and software has significant performance advantages for data warehousing applications. We had to respond with our own hardware/software combination, the Exadata database machine. Oracle's Exadata database machine runs data warehousing applications much faster -- at least ten-times faster than Oracle software running on conventional hardware. All the hardware and software pieces, database to disk, are included. You just plug it in and go -- no systems integration required.
Q. Oracle's done integrated hardware and software design with the Exadata database machine. But Exadata uses standard Intel chips. Are you going to discontinue Sun's SPARC chip?
A. No. Once we own Sun we're going to increase the investment in SPARC. We think designing our own chips is very, very important. Even Apple is designing its own chips these days. Right now, SPARC chips do some things better than Intel chips and vice-versa. For example, SPARC is much more energy efficient than Intel while delivering the same performance on a per socket basis. This is not just a green issue, it's an economic issue. Today, database centers are paying as much for electricity to run their computers as they pay to buy their computers. SPARC machines are much less expensive to run than Intel machines.
Q. Is your plan to use SPARC to compete by lowering a data center's electricity bills?
A. No. Our primary reason for designing our own chips is to build computers with the very best performance, reliability and security available in the market. Some system features work much better if they are implemented in silicon rather than software. Once we own Sun, we'll be able to plan and synchronize new features from silicon to software, just like IBM and the other big system suppliers. We want to work with Fujitsu to design advanced features into the SPARC microprocessor aimed at improving Oracle database performance. In my opinion, this will enable SPARC Solaris open-system mainframes and servers to challenge IBM's dominance in the data center. Sun was very successful for a very long time selling computer systems based on the SPARC chip and the Solaris operating system. Now, with the added power of integrated Oracle software, we think they can be again.
Q. Your management team has no experience with delivering hardware. There is a lot of risk in going into an unfamiliar business.
A. Obviously, we want to hold on to Sun's experienced team of first-rate hardware engineers. For years, Sun has led the industry in building and delivering innovative systems. For example, Sun was the first company to deliver systems built on a multi-core processor -- what Sun called the Niagara chip -- and the industry followed. Oracle has a good track record of retaining the engineering talent from acquired companies; Sun will be no different. In addition, over the last couple of years Oracle gained a lot of experience developing and delivering our first integrated hardware and software system, the Exadata database machine. We have lots of hardware experience inside of Oracle. Hundreds of Oracle's engineers came from systems companies like IBM and HP. Even I started my Silicon Valley career working for a hardware company that worked with Fujitsu to design and build the first IBM compatible mainframe.
Q. There has been a lot of speculation in the press that Oracle is going to sell some or all of Sun's hardware businesses. From your previous answers it certainly seems like you are keeping SPARC Solaris systems business. Are you keeping the disk storage and tape backup businesses?
A. Yes, definitely. We believe the best user experience is when all the pieces in the system are engineered to work together. Disk storage and tape backup are critical components in high-performance, high-reliability, high-security database systems. So, we plan to design and deliver those pieces too. Clearly many Sun customers choose disk and tape systems from other vendors. That's what open systems are all about: providing customers with a choice. But Oracle expects to continue competing in both the disk and tape storage businesses after we buy Sun.
Q. Is Exadata moving to Sun SPARC Solaris?
A. Exadata is built by HP using Intel microprocessors. We have no plans for a SPARC Solaris version of Exadata. We have an excellent relationship with HP that we expect to continue. The Exadata database machine delivers record-setting database performance at a lower cost than conventional hardware.
Customers love the machine. It is the most successful product introduction in Oracle's 30-year history. The Sun acquisition doesn't reduce our commitment to Exadata at all. (Reporting by Jim Finkle, editing by Tiffany Wu and Matthew Lewis)
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