InternetNews: Ellison Commits to Sun's Hardware Business

That sound you heard in the Silicon Valley was Sun Microsystems employees heaving a sigh of relief. Oracle CEO Larry Ellison told Reuters that he has no plans to dump Sun's hardware. On the contrary, he's committed to the SPARC processor line.

"We are definitely not going to exit the hardware business," he told Reuters in an e-mail interview yesterday. "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. We think think designing our own chips is very, very important."

A spokesperson for Sun (NASDAQ: JAVA) declined to comment. Oracle did not return calls for comment, but the company has posted a full transcript of Ellison's interview.

Sun came within a whisker of being bought by IBM in March, but the deal collapsed at the eleventh hour. Oracle (NASDAQ: ORCL), after just three days of negotiations, swooped in and grabbed Sun for virtually the same asking price that IBM was ready to pay.

Since then, there has been speculation that Oracle, a software company, would ditch Sun's struggling hardware business.

With Intel's (NASDAQ: INTC) growing dominance and ever-improving performance, the server world has transitioned away from proprietary processors to x86, and Sun has suffered for it. It hasn't helped that IBM has been particularly aggressive at stealing Sun customers.

With the Sun SPARC hardware business contracting, speculation was that Ellison just wanted Sun's software assets and he would dump the rest. Not so. He said he plans to increase, not reduce investment in Sun's SPARC microprocessors.

Gartner fellow Martin Reynolds thinks Oracle can make the hardware work, but is unsure of its long-term viability.

"When you look at Sun, a little adult supervision can make that business very profitable," he told InternetNews.com. "They've had a hard time coming to grips with driving the business after practicality. Frankly, the open source thing hasn't worked for Sun, and that's been the mantra for years. Oracle is the other extreme, the pinstriped suit with a spreadsheet and a pencil. They know how to make a business work."

With Oracle behind Sun, a lot of questions about Sun hardware's future go away, at least for a while, he added.

Long term, there are still questions, and he thinks Oracle would be better off going the x86 route. "The challenge with SPARC is it has always been a laggard. Sun has clung to it a little longer than it should have. A lot of it depends on how good Rock is. If Rock is a killer product, then that might keep SPARC going for a few more years. But ultimately, you can't trust SPARC to deliver the goods because it doesn't," he added.

"Rock" is the codename for Sun's long-delayed successor to the Niagara line of processors. The closest to a formal name came from a blog posting by Sun CEO Jonathan Schwartz, who showed a picture of a test sample with the name "UltraSPARC RK." Originally planned for 2008, it's now not likely to see the light of day until later this year at best.

Reynolds thinks Sun's SPARC staff should still be cautious. "[Oracle] does want Sun to make a profit, they will be aggressive about it. I'm not entirely convinced investing in SPARC is the path forward, but if Larry Ellison says it, that does add some credibility. But I do think that for Sun customers that leads to a much clearer future," he said.

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