| Oracle buying Red Hat? Fat chance! |
Aug. 23, 2006
The rumors just won't quit. Last week at LinuxWorld, rumors were that Oracle would buy Red Hat; or, it would launch its own Linux distro. Neither happened, but did that stop the rumor mill? Nope.
This week, as my eWEEK buddy Lisa Vaas describes, a Sun third-party PR firm representative asked the rhetorical question: "Is it possible that Red Hat is quietly readying itself for acquisition by Oracle?" The memo went on to badmouth Red Hat.
Since then, Sun has quietly -- but very firmly -- disowned that memo.
Still, the rumor mill continues to grind out these "Oracle is buying Red Hat" stories on a regular basis.
Vaas asked some analysts what they thought about the possibility of a deal. If you boiled their comments down, what's left in all these rumors is nonsense.
I'll second that. Here's my take:
OK, at the end of the day, Oracle does whatever Larry Ellison wants it to do. I don't pretend to know Larry's mind. Other than that fact that we both like sail boats -- albeit he can afford America's Cup racers and I'd be hard-pressed to afford a Sunfish -- I can't think of any way that we're alike.
Still, I do know one thing about him: While he can make radical, expensive business decisions such as the PeopleSoft buyout, he expects to profit from these deals. By the end of the decade, if not sooner, Oracle will have shown gains from its $10.3 billion PeopleSoft purchase.
Red Hat, on the other hand, would only cost Oracle $5 to $6 billion, thinks Raven Zachary of The 451 Group research group. What do you get for those billions? You get Linux, which more than half-a-dozen other companies produce; open-source developers, to whom the idea of applying a non-compete contract is nonsense; and the Red Hat brand.
Now, the Red Hat brand is worth a lot. Trust me on this -- most of you may think that brands are just a bunch of marketing nonsense, but they're not. Still, the Red Hat brand isn't worth $5 to $6 billion.
On the other hand, Oracle could buy, say, Novell/SUSE. The analysts think that Novell would cost less. I don't think so. While Red Hat has the market share, Novell has, at last count, deep roots in the enterprise that Red Hat can't match yet, and more than a billion in the bank.
Let's say Larry decides to do it anyway. What's a few billion, right? Well, what do you think Red Hat's partners are going to say? You know, companies like IBM, which has its own database and application stack (DB2 and WebSphere), or HP? This would not go over well with Oracle's neighbors on the high-rent side of IT.
OK, so let's say Larry decides to buy an affordable Linux, like, say, oh I don't know, Mandriva. Now, we're talking a price that, at most, would be in the hundreds of millions and more likely would go for tens of millions. Or, say they roll their own Linux.
Then, Oracle would need to sync their new Linux purchase or creation with their existing Linux database programs. Afterward, they'd find themselves in the business of updating and maintaining their latest operating system toy.
Does Oracle want the expense and hassle of being an operating system vendor? I don't think so.
At the end of the day, the real reason why Oracle isn't going to buy Red Hat or roll its own Linux is that it doesn't make dollars or sense for the database giant to make this move. And, when it comes to making money and having business sense, Larry Ellison is, like him or hate him, the best of the best.
-- Steven J. Vaughan-Nichols
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