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Sun/Oracle Deal: The Hardware Implications

The blockbuster US $7.4 billion deal bringing Sun Microsystems into Oracle Corp.'s big tent (please see Bolt from the Blue: Oracle, Not IBM, Captures Sun Micro) has more than a few wondering what the world's largest business software company will do with a firm best known for its hardware offerings.

After the merger was announced Monday, Oracle CEO Larry Ellison said the acquisition of Sun would enable his company to offer customers applications and data-storage hardware in a bundle that will be tuned to help solve their business computing needs. Yet, some industry analysts speculated that by entering the hardware field Oracle could hurt long-standing partnerships with other computer vendors (especially Dell and Hewlett-Packard), as well as challenge Oracle's management to profitably run a new unit in the notoriously competitive hardware sector, where margins are historically thin even in good times.

"We have a track record of integrating acquisitions very quickly, and this will be no different," said Safra Catz, one of two Oracle presidents under Ellison, on Monday. Catz said Oracle intends to quickly make Sun's hardware operations a profitable operating unit inside the company.

The Oracle executives said its management could wring profitability out of Sun by integrating hardware and software services synergistically in the lucrative corporate marketplace as the global economy improves in the years ahead. They noted that this systems approach to providing business solutions could generate an additional $1.5 billion a year in operating profit.

"Oracle is transforming itself into a soup-to-nuts information technology vendor," Gordon Haff, an analyst at Illuminata, a technology industry research firm, told The New York Times in the wake of the announcement. "This deal promises to revitalize a systems competitor [Sun] that IBM and H-P were writing off as dead," Haff noted in a Times article.

Yet, Catz carefully mentioned that Sun "outsources nearly all the manufacturing, assembly, and servicing of its hardware." This remark did not go unnoticed by industry pundits. In a commentary typical of computer press reaction to news of the deal, Larry Dignan at ZDNet wrote that Oracle can now "pick and choose its hardware spots, unwind some systems and sell others."

The Dignan column went on to speculate that Oracle may have deemed Sun's hardware units as insignificant and Ellison's team may have few if any plans to try to turn them around. "Look for Oracle to do a little pruning before it blows any dough on Sunâ''s hardware business," Dignan concluded generously.

However, that outlook most likely underestimates Ellison's ambitions by light years.

Ellison is a person not unlike Bill Gates and Steve Jobs in his determination to leave a profound mark on the computer industry. As most observers have gathered over the years, Ellison is fiercely determined to battle it out with the giants of the industry at whatever cost is necessary, and that means going directly after the H-Ps and the IBMs and the Microsofts of the world.

When it comes to the hardware units he will be acquiring from Sun, look for Ellison to pursue new opportunities to grow Oracle into a general computing powerhouse.

Past history will only tend to goad Ellison into being even more determined to prove successful in any future foray into the world of chips and metal. In the late Nineties, Oracle moved into the hardware sector with a stripped down microcomputer that used a network connection for all its information tools. It was called the NC (for Network Computer), and it was supposed to revolutionize low-end computing for businesses.

The set-top-box-size device, however, proved to be a flop in the marketplace, as well as an embarrassment to Ellison personally. The NC, which counted on the promise of the network literally being the computer was a product too far ahead of its time to succeed. Oracle's partner a decade ago in the doomed venture was none other than Sun.

Don't look for Ellison to make the same mistake twice. He's got an entire arsenal of weapons at his disposal now to make another assault on the future of the whole industry.

Kieron Murphy is a contributing editor to IEEE Spectrum. He has covered the computer industry for more than 20 years.

Future owners of the Aptera 2e meet that all-electric carâ¿¿finally


The hundreds of people standing patiently in line in a Silicon Valley parking lot last night were not Apple fanboys waiting for that companyâ''s latest product release. Instead, they were future owners of a new electric car, the Aptera 2e, scheduled to start rolling off manufacturing lines this fall. These folks put down deposits a year or more ago, have drooled over artists' conceptions and photos of prototypes for months, and, finally, were getting a chance to look atâ''and briefly sit inâ''working models.

The three cars parked in front of Stanford Shopping Center were not production versions of the Aptera 2e. One was prototype number two, one a preproduction model, and one a development prototype snatched from the engineering lab but not quite done. But the folks in line were happy to have any version of an Aptera in front of them at last. They touched them, they sat in them, they photographed them.

David Sweet, a programmer for Microsoft who is number 429 on the depositers' list for the hybrid, a model expected to follow the electric, told Spectrum that the big attraction, for him, is the operating cost. Because he can plug in at work and let Microsoft pay the electric bill, it will essentially be nothing. He expects to follow through on his deposit and buy the car if it gets to market before the Chevy Volt. â''Basically,â'' he said, â''the first out wins.â''

Tom Driscoll, a design consultant for Akeena Solar and holding a reservation number in the low 700s for the all-electric version, said that he is drawn by the environmental friendliness. He expects to purchase the car as soon as his number comes up.

Russ Hedgpeth, CEO of Unity Electronics and number 60 on the list for the all-electric model, is simply a car buff, and will definitely be adding an Aptera to his collection of cars and motorcycles. Hedgpeth was thrilled to see the vehicle in person. â''Pictures can only go so far,â'' he said.

The Aptera 2e is a three-wheeled all-electric two-seater, capable of driving some 160 km (officially) to 240 km (unofficially) between charges; a later model will include a small gas engine to extend its range. The 2e weighs 770 kg and has a top speed of 145 km/h. It is expected to sell from $25,000 to $40,000. Aptera, founded in 2006, is based in Vista, Calif., near San Diego, but did this first of what will be a series of showings around the country for customers in Silicon Valley, since so many of the folks who put down deposits are clustered here.


The Aptera 2e looks like a white bird, particularly with its gull-wing doors open.


Future electric vehicle owners color pictures of the Aptera 2e.

Photos: Tekla Perry

Imbibing in the Nanotech Kool-Aid

I donâ''t know anything about U.S. Rep. Daniel Lipinski (D-3) of Illinois, but I have to give him credit for providing the wackiest urging to date on why one should invest in nanotechnology: because he has â''drunk the nanotech kool-aidâ''.

Apparently, after drinking this Kool-aid, Rep. Lipinksi believed nanotech would become â''the next Industrial Revolution.â'' Oh dear, I havenâ''t heard that line since 2001.

It seems the rest of the forum held at the University of Chicago had political discussions about â''building the tax baseâ'' and â''immigration restrictionsâ''. And then got into this whole business about maintaining â''Illinoisâ'' position as a leader in the field.â'' Sometimes this stuff just makes we want to weep.

You know, for all of Russiaâ''s odd little news items about their nanotech ventures at least they recognized that they had no idea how they should be measuring the economic impact of nanotechnology, and they were going to bother to figure it out before their second full year into their initiative.

But the US government, or at least some of its officials, seems to think that itâ''s still the next industrial revolution, and some regions of the country are ahead of others, but there donâ''t seem to be any metrics on how itâ''s doing thus far.

Itâ''s sort of like bragging that your car is the solution to the energy crisis because itâ''s so efficient, but youâ''ve never bothered to figure out what its miles-per-gallon figures are.

Itâ''s time to stop drinking the Kool-aid, roll up our sleeves and figure out why the billions of dollars poured into nanotech funding have garnered us little more than strong, lightweight tennis racquets and stain-resistant pants. These things are fine, but they are long way from even hinting at the next Industrial Revolution.

Russia Plans to Track Its Own Nanotechnology

I really love the story of nanotechnology in Russia thus far. You have intrigue. You have fantasy. And now we have internal conflict (or should I say internal contradiction).

The Moscow Times is reporting that Anatoly Chubais, RusNano's chief, has said, "Right now, no one in Russia even knows how much nanotechnology production there is." But then in the same article Chubais explains that last year the country produced 4 billion rubles ($120 million) to 20 billion rubles worth of nanotechnology equipment and materials.

Okay in his defense, he acknowledges that these numbers are probably pretty fuzzy and the idea is to start figuring out what they should be counting as nanotechnology. But couldnâ''t this point be made without trotting out the self-acknowledged â''fuzzyâ'' numbers.

I do enjoy making jokes about some of the funny press releases that come out about Russiaâ''s nanotechnology initiative. But I think their basic premise of dealing with government funding of nanotech in part through funding academic research and the other part through a fund that would lead to commercialized products is looking like it makes a lot more sense. Especially in light of all the government funding that has been poured into academic research and governments now wondering whether there is any economic impact to show for it.

Blurring Nanotechnology Definitions Ushers It into Discussions of Agriculture

I just finished listening to a podcast interview with Jennifer Kuzma, who is a science and policy expert at the University of Minnesota.

I was struck by the interviewers persistent questioning on the role of nanotechnology in agriculture. While Kuzma was able to readily provide a list of nanotechnologies used in specific food applications, she never really did the same for agriculture. Maybe because, like me, Kuzma is not aware of any applications for nanotechnology in agriculture.

Okay, a lot of agriculture science is based on molecular and cellular biology that operates on the nanoscale, but is anyone really calling this nanotechnology? I think they call it molecular and cellular biology. And if there is some growing desire to get better regulations around nanotechnology, why not the same for molecular and cellular biology?

There seems to have been a long-standing wish to somehow tie genetically-modified crops (the so-called GM foods debate) to nanotechnology, that somehow they are one and the same or just a continuation of evil science morphing our foods.

Maybe itâ''s time to nudge this talking point into the realm of reason rather than hysteria. I hope the next time Kuzma does one of these podcast interviews she decides that it is better to make it clear that the role nanotechnology plays in agriculture is tangential at best.

Bolt from the Blue: Oracle, Not IBM, Captures Sun Micro

Just days after rumors circulated that IBM Corp. had pulled out of a multi-billion dollar deal to acquire Sun Microsystems, the maverick CEO of Oracle Corp. has stepped into the picture to take over the ailing workstation maker with an offer that, ironically, nearly matches the original proposition from IBM.

Sun, the Santa Clara, Calif., hardware and software vendor, famed for its motto "The Network Is the Computer," unexpectedly announced today that it has agreed to terms with Oracle, of Redwood City, Calif., for a purchase price of US $9.50 per share in cash, or $7.4 billion (including assumption of debt).

Sun's management had entered into talks with IBM in March, in which industry analysts had said that the Armonk, N.Y., computer giant had offered to pay close to $10.00 per share to gain control of Sun (please see For IBM, the Allure of Sun Lies in Next-Gen Software Services in this space for more). In subsequent, negotiations, though, IBM lowered its bid to $9.50 after performing due diligence on Sun's accounting, according to published reports. Further wrangling over the purchase price and internal squabbling within Sun's boardroom (between factions aligned between Chairman Scott McNealy and Chief Executive Officer Jonathan Schwartz) led to IBM lowering its offer once again to somewhere between $9.10 and $9.40. That caused the prospective deal to collapse entirely only two weeks ago (see IBM Talks Teeter as Sun Board Splits in The Wall Street Journal).

In today's announcement, Sun pointed to its flagship software properties as being key to the merger with Oracle, the world's leader in business management software. Sun's press release stated that the acquisition would give Oracle control over an operating system and a development language that have come to underlie much of the most lucrative software products Oracle sells. Sun's Solaris operating system is the leading platform for Oracle's database offerings, and Sun's Java programming language provides the foundation for powerful computing tools such as Oracle's Fusion middleware, the company's fastest growing business.

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," Oracle CEO Larry Ellison said today. "Oracle will be the only company that can engineer an integrated system -- applications to disk -- where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability, and security go up."

"Oracle and Sun have been industry pioneers and close partners for more than 20 years," said Sun Chairman Scott McNealy. "This combination is a natural evolution of our relationship and will be an industry-defining event."

Today's announcement came as a surprise to the business world (see Oracle Agrees to Acquire Sun Microsystems in The Wall Street Journal). With two leaders in the software sector as mercurial and tough-minded as Ellison and McNealy, though, the pairing of Oracle and Sun may have coalesced quickly over the weekend, as the latter may have finally realized that the company he co-founded 27 years ago had met its match. Today's statement from Sun noted that the deal had been unanimously approved by the firm's board of directors, settling an internal dispute over Sun's continued independence, in which McNealy had argued for maintaining stewardship of the company through the precipitous downturn in the global economy.

Look for further analysis of today's blockbuster deal in the software field (such as this column by Senior Editor Tekla Perry) in IEEE Spectrum in the days ahead.

The Oracle/Sun acquisition is the culmination of a decades-long dance between company founders Ellison and McNealy


Though Sun Microsystems had four founders, it became, as it grew and prospered, increasingly identified with its longtime CEO and now chairman, Scott McNealy. And McNealy, clearly, considers this company his baby.

Throughout those years, McNealy became an icon of Silicon Valley entrepreneurism and of open source computing; he cast himself as the anti-establishment hero, fighting the forces of evil represented by IBM and Microsoft. He relished this roleâ''heck, he named his first kid Maverick.

Sometimes, along the way, he teamed up with another brash Silicon Valley entrepreneur, Larry Ellison, to shred those corporate behemoths. The two were particularly vehement in their anti-Microsoft rhetoric during the time of the antitrust trial, and also worked together to compete against IBM.

Says John Gage, the fifth employee at Sun who served as head of its science office for decades, â''Scott doesnâ''t go over and drink tea in Larryâ''s house, but theyâ''ve had a mutually respectful semi combative relationship over a long time.â''

And McNealy has more than once when speaking about Ellison, â''the enemy of my enemy is my friend.â''

That friend just rode in to the rescue. For Sun, itâ''s been looking like the company had to get acquired or die, but for McNealy, corporate death might have been preferable to handing off the company to IBM; he reportedly was behind Sunâ''s rejection of an offer from IBM a few weeks ago. Today, Sun and Oracle announced that Oracle is acquiring Sun for $9.50 per share, or approximately $7.4 billion.

While Wall St. may have been surprised by the announcement, it makes complete sense to Gage, now a partner at venture firm Kleiner Perkins Caufield and Byers. â''Scott and Larry have had a long long relationship, and Oracle and Sun have always been in a dance. Sun has been Oracleâ''s primary development environment; Sun used Oracleâ''s database. So people at the company would regularly call each other up and say â''Fix this in your operating system, we canâ''t use it this way,â'' or â''Fix this in your database, what were you even thinking?â''

"It is a complementary relationship," Gage says, "because, in the end, the point of computers is to store data."

Gage is looking for good things to come out of an Oracle/Sun union. â''There are remarkable technologies inside of Sun that very few customers of the company understand,â'' he told Spectrum. But he thinks these two Silicon Valley companies indeed understand each other, helped by their proximity. Among the many technologies inside Sun that could bloom inside of Oracle, he cites a file system technology that automatically updates yet lets the user instantly rewind the system to a previous state, and JavaFXâ''a graphical scripting language that could lead to creative rethinking of database interfaces.

The combination of the two companies, Gage says, â''will create new, powerful applications, and, after a period of time of adjustment between the two cultures, inspire innovations.â''

Photo: Sun Microsystems

The darkest hour is just before dawn, but midnight looks just as dark

The AP reported last week that â''Retail sales fall unexpectedly in March.â'' Really? Was it really unexpected?

Iâ''m continually amazed at the relative optimism being expressed on Wall Street, in Washington D.C., and in the business press.

According to the AP, analysts expected a 0.3 percent increase in retail sales. In fact, they dipped 1.1 percent. The analysts predicted the Producer Price Index to rise 0.1 percent, in fact it went unchanged.

Who are these analysts and why canâ''t I get that job? Throwing darts at a cork board would seem to have about the same accuracy, and I could go to the movies for the other 39 hours of my workweek. Or maybe 36, assuming my hours were to get cut, as they are for many employees.

Actually, the business world has a reason for this relative optimism, itâ''s just not a very good one. Typical is this quote from U.S. Fed Chair Ben Bernanke:

"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing," Bernanke said. "A leveling out of economic activity is the first step toward recovery.â''

Yes, Ben, the curve that sees us bottoming out would show negative indicators slowing down before the economy goes into recovery. However, the curve that sees us heading into depression might also show a slowing. Hell, the pessimists believe that the downturn has so much momentum, even with the brakes on, weâ''ll coast into depression.

We know from the polynomial theorem that an infinite number of curves are consistent with any finite set of datapoints. You would think an MIT-trained PhD economist who won his stateâ''s spelling bee at age 11 would know these things. In fact, you would think everyone would know it, at least intuitively, but the Washington Post had a nice, um, post, about The Shape of the Recession.

Will it be V-shaped, as in a steep decline followed by a rapid recovery? How about U-shaped, with a longer downturn and slower upswing? Or even L-shaped, featuring a quick plunge that flatlines forever?

An alternative forecast taking hold around town sounds (but only sounds) like a swipe at the former president: the W-shaped recession, in which the economy falls and bounces back quickly, only to decline again.

The W shape provides a single theory that is consistent with both the crazy optimistic V ideas spouted by Bernanke, and the pessimistic view that the economy is in much worse shape than the optimists think.

To put it mildly, thereâ''s a lot more bad news than good. As was widely reported, March was the first deflationary month in more than 50 years in the U.S. The Guardianâ''s story was typical.

The consumer price index fell at an annual rate of 0.4% in March, the first decline since August 1955, figures from the US labour department showed today. It was bigger than the 0.1% drop expected by economists.

Compared with the previous month, consumer prices dipped by 0.1%.

The decline was mainly caused by lower energy costs, which offset a surge in tobacco prices, the biggest since 1998. If energy and food costs are excluded, the annual inflation rate stands at 1.8%.

Energy costs fell by 3% on the month and gasoline prices were down 4%. Food and housing costs both edged down by 0.1%.

Even the quasi-optimistic AP story reported that â''wholesale prices plunged 1.2 percent in March as the cost of gasoline, other energy products and food fell sharply.â''

Worse, companies are freezing and even decreasing salaries, particularly in high-tech, where HPâ''s much-publicized 5% cut back in February has been typical.

A Houston Chronicle article earlier this month quoted John Challenger, of recruitment firm Challenger, Gray & Christmas, as saying â''The number of pay cuts weâ''re seeing around the U.S. is unprecedented.â''

Unprecedented. Consider that, business columnist Robert J. Samuelson, who, like Bernanke, ought to know better but who wrote in todayâ''s Washington Post, â''Given today's economic crisis, our renewed fascination with the Depression is natural. But we ought not stretch the parallels too far.â''

If youâ''re wondering how bad things can get, Eric Savitz over at Barronâ''s says we should â''Ask FSI International.â''

FSI International (FSII) is now a company that almost no one follows. But the latest results from the tiny Minneapolis-based semiconductor equipment firm offers a sobering snapshot of conditions in the industry.

For its fiscal second quarter ended February 28, FSI posted revenue of $8.6 million, which is down 60% - 60%! - from the $21.4 million reported in the year-earlier quarter.

Ask FSI when the economy will recover and you wonâ''t get one of these rosy Bernanke V-shape answers.

In a statement, CEO Don Mitchell gives the explanation youâ''d expect: â''the global economic downturn is continuing to adversely impact credit availability, consumer confidence and technology spending,â'' which in turn has caused â''low factory utilization levelsâ'' at most semiconductor manufacturing companies, resulting in reduced or delayed capital spending.

And despite some optimism on the Street, Mitchell does not see any early recovery. â''Even though it is reported that several device producers have recently started to experience improved utilization levels, we anticipate that this situation will persist until at least early calendar 2010,â'' he says.

We Finally Have a U.S. CTO


Most high-tech professionals haven't heard his name before, but soon, many will be talking about Aneesh Chopra, the latest appointment to the Obama administration, as the federal Chief Technology Officer. After months of speculation, Chopra, announced by the president on Saturday, is on the job.

Chopra is known as being intelligent, engaging, and effective. Having served as Secretary of Technology for the State of Virginia since 2003, his focus has been on statewide technology strategy, government form, and technology-related economic development, all of which apply directly to the tasks he will be performing at the federal level. As Tim O'Reilly puts it, "Chopra has a real focus on measurement, and on figuring out what really works."

With a Masters in Public Policy from Harvard and experience in streamlining healthcare technology, it looks as if the administration will be leaning heavily on Chopra for expertise in how to tackle some of our most challenging national problems. Working closely with Vivek Kundra, the new federal CIO and Jeffrey Zients, the Chief Performance Officer, Chopra will be part of a tight team in the White House Office of Science and Technology Policy. If there's any area where people expect results, it's technology innovation.

Although some have reported the appointment as a slap in the face of Silicon Valley and established tech industry professionals, as O'Reilly points out, "industry experience does little to prepare you for the additional complexities of working within the bounds of government policy, competing constituencies, budgets that often contain legislative mandates," etc. According to the Wall Street Journal, experienced technology leaders like Eric Schmidt of Google and Mitch Kapor of Lotus (and co-founder of the Electronic Frontier Foundation) applaud the choice.

In the days and months to come as the Obama administration lays out their agenda for technology, we can expect Chopra, along with Kundra, to be behind much of those plans. On top of lofty goals of transparency and reform, they will need to prove their strategies work on an unprecedented scale.

â''Sarah Granger

Recession Forcing U.S. to Reconsider Retiring Space Shuttle Fleet

The economic downturn is causing U.S. lawmakers to pressure the Obama administration to change its plans to end the space shuttle program next year, according to an article in The Wall Street Journal.

With unemployment reaching record levels, legislators from states such as Alabama, Florida, and Texas, where the space program employs thousands of advanced engineers, are speaking out on the need to keep the shuttle fleet flying into the near future.

NASA's current plans call for mothballing the three shuttles comprising the Space Transportation System after the last major component of the International Space Station (ISS) is delivered in 2010. That would free up funds for the space agency to concentrate on its next-generation rocket program known as Project Constellation, expected to need about a decade to perfect.

While Constellation is creating new jobs and many involved in the shuttle program will find employment working on the new project, prominent voices in the U.S. Congress are unhappy that the transition looms in the midst of an economic slump in which engineers are already facing tough times.

Grounding the shuttle fleet will give thousands of more engineers little to do for years while the rockets and crew vehicles of Constellation are being developed, those representing the most affected states worry. Indeed, the current plan calls for missions to the ISS to be assumed by the Russian space program, which would see additional flights assigned to that nation's workhorse Soyuz spacecraft.

Sen. Bill Nelson (D-Fla.), a former astronaut, has included language in the federal budget bill now under debate to provide an extra US $2.5 billion to keep the shuttles flying through 2011, even though NASA opposes the move.

Complicating matters, the Obama administration has yet to settle on a nominee for a leader for NASA to replace longtime chief Michael Griffin, who retired in January to give the new president a free hand to pick someone of his own liking.

In a report released yesterday by the congressionally created Aerospace Safety Advisory Panel, the group strongly endorsed NASA's 2010 retirement deadline, concluding that planning to fly longer "not only would increase the risk to crews, but also could jeopardize" funding for future exploration efforts, according to the Journal.

Still, there is considerable room for debate in the month's ahead, with input coming from public officials and industry leaders alike, before the last chapter of the storied history of the space shuttle program is written.

Stay tuned for much, much more to come.


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