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Oracle and Sun Renew Partnership
By Susan Kuchinskas

January 11, 2006

REDWOOD SHORES, Calif. — Sun Microsystems (Quote, Chart)will become an Oracle (Quote, Chart)OEM as part of a ten-year agreement the companies announced on Tuesday.

Oracle CEO Larry Ellison and Sun CEO Scott McNealy held a “town hall” meeting for employees, analysts and media to lay out the details of the strategic partnership.

Sun will distribute the Oracle Database Enterprise Edition with its Solaris operating system, along with one year of support from Oracle, in a licensing deal that makes it essentially free. At the same time, Sun will move its entire company onto Oracle ERP software.

Oracle named the Solaris operating system a preferred 64-bit development platform and will work to migrate its business applications to Sun’s Java. It took out a new ten-year license for Java, its third such, and endorsed Sun’s NetBeans technology.

Finally, the companies plan an aggressive “go-to-market” strategy that will include joint outreach to developers, an upgrade program for Oracle Real Application Clusters on Sun hardware, and customer-ready systems including hardware and software for key verticals and small to medium-sized businesses.

“Oracle has based entire our middleware strategy on Java and J2EE integration,” Ellison said. “Our approach is all built around Java.” He said the move was sparked by requests from customers.

McNealy and Ellison reiterated that both companies’ products are built on open standards, and that they therefore had a common mission to compete against companies like Microsoft (Quote, Chart)and IBM (Quote, Chart)that had proprietary offerings.

“We’ll collaborate, interoperate and use collaborative and community development to go after what tends to not be so open,” McNealy told the crowd.

Ellison estimated that around 95 percent of the two companies’ products are non-competitive, with middleware being the area in which the two go head to head.

Sun and Oracle have reaffirmed their commitment several times in the last few months. In November, the companies announced that Sun’s open Solaris 10 operating system would be the preferred 64-bit application development and deployment platform for Oracle.

A few weeks later, Oracle President Chuck Phillips joined McNealy onstage at Sun’s UltraSparc T1 server launch to say that Oracle would cut its licensing fees by charging users on a processor factor of .25 for each UltraSparc T1. Oracle also offered significant discounts for machines based on AMD and Intel chips.

But Ellison left the door open for other partners that compete with Sun. For example, Oracle and Dell bundle Oracle Database 10g Standard Edition One with Microsoft Windows Server 2003 on Dell PowerEdge servers.

When asked about Dell, Ellison said, “We have multiple partners, and we don’t want to imply that our only partner is Sun,” Ellison said. “We have a close relationship with Dell.” But he added that Sun’s new line of 64-bit servers were better than anything Dell makes.

He promised Oracle would also continue development in Linux and

Meanwhile, in addition to the Oracle database, Sun also will provide PostGres and MySql with Solaris; customers will have to request Oracle EE.

Ellison’s endorsement of NetBeans, Sun’s integrated development environment, was a bit lukewarm. Pointing out that Oracle has its own Java development tool, JDeveloper and is involved with Eclipse, he said, “We think the NetBeans initiative is important in the marketplace, and we’re watching it very closely. Right now, we’re focused on JDeveloper and Eclipse.”

“There’s a clear focus on going for share,” McNealy said. “You’ll see that in Oracle’s pricing models and in our marketing efforts. We’re an OEM of Oracle, and we have a commitment to go out and blow the doors off.”

He said the Oracle database/hardware packages Sun will offer will be 25 percent less expensive than IBM’s and half the price of the HP 9000.”

Tom Goguen, vice president of operating platforms for Sun, told that the OEM agreement with Oracle was an extension of Sun’s business model of supplying a package of software, hardware, support and services. “We have everything except the database,” he said.

He wouldn’t comment on whether Sun will pay Oracle for the database, but Ellison said that Oracle salespeople would be compensated for databases distributed by Sun.

“This is a very aggressive move that positions us as a low-cost leader,” Goguen said.

IDC analyst Jean Bozman called the deal “scale up and scale out.”

She said, “They’re scaling up the market in which they’ll compete. They have common customers they want to retain, and they want to grow their market.” At the same time, Bozman said, Sun sells a higher volume of Unix servers than HP and IBM. That aligns well with Oracle 10g, the relational database designed for grid computing. Selling hot-pluggable racks of Sun servers glued together with Oracle 10g would let the companies “scale out” to serve smaller enterprises, Bozman said, especially if the two companies offered servers pre-installed with vertical applications.

McNealy promised Oracle Database EE would be available on all UltraSparc products, from the low to high end, within a few weeks.

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