Coverage Analysis: Oracle Acquisition Is Not A Slam Dunk

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We looked at coverage from the Wall Street Journal, The Register and CNET to glean some insight into Oracle’s acquisition of Virtual Iron.

Overall, the acquisition hardly looks like a slam dunk. The Virtual Iron technology has particular strengths in its management capabilities but it is questionable if it is really first rate. The purchase probably came pretty cheap for Oracle. Details of the transaction were not disclosed. But Virtual Iron had been making little noise in the market. Its market share is insignificant. It’s a relatively small company.

Coverage Analysis

News Source: Wall Street Journal
What They Say: Acquisition is low risk but questions remain about Oracle’s overall strategy to be a one stop shop.
Our comment: In a world where consumer web applications have increasing influence, does it still make sense to try to achieve dominance through all-in-one packages? Large companies continue to acquire the small players, which are not always best-in-class. As this trend continues, the real threat may come more from micro-applications, for instance, that work with open-source virtualization technologies and provide cloud-based, real-time capabilities.
Pull Quote: “….Most of Virtual Iron’s customers are small and medium-sized businesses, so the deal isn’t about market share or gaining customers. The deal is a low risk one for Oracle: It probably didn’t pay a whole lot for Virtual Iron, and the company is pretty experienced at integrating these small shops. The risk is all around the company’s vision. The question facing Oracle is “will customers be willing to give up choice for simplicity and ease of deployment,” says Michelle Bailey, an analyst at IDC. Buying everything from Oracle will reduce complexity, but it will give customers less leverage to negotiate.”

News Source: The Register
What They Say: Virtual Iron has management tools and expertise that it needs if it intends to compete with Red Hat, VMWare, Citrix Systems and Microsoft.
Our Comment: Virtual Iron needed to be bought as much as Oracle needed to fill some holes in its offerings. Virtual Iron, previously known as Kantana, had to re-invent itself after the dot-com boom. It’s not quite clear how well its software actually worked before they dumped it. Of their current offerings, the critical factor for Oracle’s success may be the scriptable API’s that Virtual Iron brings to the table. One of the big issues with virtualization is the complexity for IT managers. According to The Register, the API’s give IT managers the ability to manage the physical and virtual machines so they may be better orchestrated from a higher level and with the same tools.
Pull Quote:“With the money and a revamped Xen stack, Virtual Iron tried to set itself up as a cheaper alternative to VMware and a better Xen implementation than the one that XenSource, the company behind the Xen project, delivered to the market. But once VMware went public, Citrix Systems bought XenSource, and Microsoft got its freebie Hyper-V into the field, Virtual Iron – even with its $65m in total venture funding – was just not up to the task of taking on these three companies. It has been very quiet in the past year after being very aggressive for the prior three.”

News Source: CNET
What They Say:Tough one to make sense of, especially following the Sun acquisition announcement. Uncertain why Oracle purchased a technology company that may be on the roster but looks more like a “fourth string quarterback.”
Our Comment:Sun Microsystems is the big question mark. Is there overlap with Virtual Iron? Sun has considerable virtualization assets of its own.
Pull Quote:“Oracle hasn’t so far discussed Virtual Iron’s role with respect to channel strategy. Sun, like Oracle itself, offers products that have very much an enterprise flavor. Virtual Iron, by contrast, has in recent years primarily focused on the midmarket–smaller companies that didn’t necessarily have the best fit with the sophistication (and complications) of products from the likes of VMware. So there seems at least the potential here for Oracle to expand its reach down-market–perhaps in conjunction with parts of Sun’s open-source stack such as MySQL.”

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One Response to Coverage Analysis: Oracle Acquisition Is Not A Slam Dunk

  1. Hawk
    Rob May 14, 2009 at 11:43 am #

    Until revisionists come up with a euphemism for proprietary, that the market doesn’t despise and pay retribution for, Oracle will continue to deploy resources errantly and flounder on Wall Street. Markets are no longer looking away from the problems Sun had in Europe and ignoring the major one Microsoft remains baffled over. Markets will decide on distribution of architecture and the evolution of the digital relationships will dictate how the market conforms or adopts.

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