The Database Report – April 2008

The first quarter of any given year can be dull and inactive, but that certainly does not describe the first quarter of 2008. Amidst several interesting acquisitions this quarter is another major
coup for Oracle and another major acquisition by a hardware vendor that should have major ramifications on the DBMS market for years to come. We will look at these deals and other acquisition
related news, follow up on some stories we covered in past editions of The Database Report, and examine all of the news that’s fit to examine in the world of data and database systems.


Oracle Acquires BEA Systems

In early January 2008, Oracle agreed to purchase BEA Systems for approximately $8.5 billion. This is a major acquisition for Oracle, and it comes after several years of industry speculation. The
deal calls for Oracle to pay $19.375 per share for BEA.

“The addition of BEA products and technology will significantly enhance and extend Oracle’s Fusion middleware software suite,” said Oracle CEO Larry Ellison. “Oracle Fusion
middleware has an open ‘hot-pluggable’ architecture that allows customers the option of coupling BEA’s WebLogic Java Server to virtually all the components of the Fusion software
suite. That’s just one example of how customers can choose among Oracle and BEA middleware products, knowing that those products will gracefully interoperate and be supported for years to
come.”

Oracle President, Charles Phillips, in an additional statement sought to ease BEA customer worries, clearly stating that BEA customers would not be forced to migrate to Oracle’s applications
in order to continue using their existing BEA middleware solutions.

This deal should benefit Oracle relatively quickly. The adoption of BEA’s WebLogic server should improve upon Oracle’s existing Java EE engine. With the BEA technology under its belt,
Oracle bolsters its position as a powerhouse vendor in the portal, process, and middleware space. Its revenue in these markets would rate second only to IBM.

Over time, it stands to reason that Oracle will review the technology portfolio it gains by acquiring BEA and consolidate the combined product line. But I would not expect any imminent sunsetting
of product lines. Oracle has a good history of supporting the products it acquires for reasonable periods of time – and sometimes indefinitely. At any rate, companies will have the option of
buying a world class database server and application server from Oracle as a single vendor.

And Oracle has promised “lifetime support” for BEA products that overlap with Oracle’s products. So BEA users won’t have to move off of their BEA solutions, but I would not
be surprised to see Oracle raise support prices. After all, they have to pay for that multi-billion dollar acquisition somehow, right?

So what about that seemingly steep price? Oracle has been pursuing BEA for some time, with rumors about this type of acquisition dating back at least 3 years. And don’t forget, Oracle made an
offer for BEA just last quarter. We reported here last quarter that Oracle, in a letter to BEA’s board, stated that it was “unwilling to increase” its offer of $17 per share. BEA
had countered the $17 offer with a $21 per share price, a multiple of nearly eleven times BEA’s last twelve months’ reported maintenance revenues. Oracle’s Charles Phillips stated
that “Nobody would seriously consider paying that kind of multiple for a software company with shrinking new license sales.”

So, I guess nobody would seriously consider $21 per share, but $19.375 is eminently reasonable? What a difference a buck and half or so can make, huh?


The Sun Shines on MySQL

On the same day in January that Oracle announced its intentions to acquire BEA Systems, Sun stole Oracle’s thunder by announcing that its intention to acquire Swedish database software vendor
MySQL for approximately $1 billion. Although Oracle’s acquisition was costlier, Sun’s was probably more interesting, at least in the database community. MySQL is viewed as an
up-and-coming technology that eventually could battle the entrenched DBMS triumvirate of IBM, Oracle, and Microsoft. Already, the MySQL database server is used for some of the most widely visited
websites in the world.

The $1 billion price tag for MySQL breaks down as follows: Sun will pay approximately $800 million in cash in exchange for all MySQL stock and assume approximately $200 million in options.

Sun’s acquisition of MySQL is big news and is very important for several reasons. From Sun’s perspective, it helps to cement Sun’s position in enterprise IT organizations. It is also
significant because it targets the largest commercial open source provider while buying Sun’s way into the $15 billion database software market. The move positions Sun well in the most
rapidly growing segment of the database market – open source DBMS in general and MySQL specifically.

The move might also be viewed as a positive from the perspective of MySQL database users. Sun’s server and storage hardware is a known commodity within the realm of large IT shops, and this
move may help to bolster MySQL’s place within those shops. It also should deliver some degree of confidence in the financial security and viability of MySQL to enterprise IT organizations

Of course, MySQL is entrenched on the web with millions of global deployments including Facebook, Google, Nokia, Baidu and China Mobile. Sun hopes to build on this success by driving new adoption
of MySQL’s database software in more traditional applications and enterprises. The hope is that the integration of MySQL with Sun will extend the commercial appeal of MySQL’s offerings
and improve its value proposition.

“(This) acquisition reaffirms Sun’s position at the center of the global Web economy. Supporting our overall growth plan, acquiring MySQL amplifies our investments in the technologies
demanded by those driving extreme growth and efficiency, from Internet media titans to the world’s largest traditional enterprises,” said Jonathan Schwartz, CEO and president, Sun
Microsystems. “MySQL’s employees and culture, along with its near ubiquity across the Web, make it an ideal fit with Sun’s open approach to network innovation.”

Yet there are some technical issues that Sun will need to address before MySQL gains wide adoption in enterprise accounts. For example, MySQL can experience performance and concurrency issues when
used with InnoDB. This is particularly troubling because InnoDB is the most widely used storage engine deployed by MySQL database implementations. MySQL also does not have all of the in-depth
features available in the commercial big three DBMSs, and that could slow Sun’s march into enterprise accounts with MySQL. As such, Sun may need to develop plans to also quicken the pace at
which bells and whistles are added to its newly acquired database server.

What does this acquisition portend for the open source world? It could have serious ramifications because MySQL’s database is the “M” in LAMP – the open source software stack
comprised of Linux, Apache, MySQL and PHP/Perl viewed by many as the foundation of the Internet. Sun indicates that it is committed to enhancing and optimizing the LAMP stack on GNU/Linux and
Microsoft Windows along with OpenSolaris and MAC OS X. Indeed, open source zealots should be pleased with this transaction. If MySQL was to be acquired, Sun is at least a friendly face. It has a
history of working with the open source community as evidenced by its work with Open Office, OpenSolaris and OpenSparc and, of course, Java.

With so many positives it is hard to see any potential downside to this deal. However, some pundits expressed concern that Sun might transform MySQL to run only on Solaris. Sun did indeed follow
such a strategy in some of its previous acquisitions. But I truly doubt that there is any chance that Sun will repeat its past mistake – especially with a database server where users
sometimes are tied to their existing hardware and operating system with an almost religious fanaticism.

Others have indicated that there is a risk that Sun will mismanage MySQL. Of course, such nebulous concerns are difficult to predict, and we will have to wait and see how things progress.

Unlike many of the acquisitions we cover in The Database Report, this one was announced and closed in the same quarter. When the transaction was completed in late February, MySQL began
operating as a business unit within Sun’s Software organization. MySQL’s CEO, Marten Mickos, joined Sun’s senior executive leadership team.

Sun immediately made available the entire portfolio of MySQL offerings through its global sales and services organization. And allaying any fears, users still can get started by freely downloading
MySQL software at dev.mysql.com/downloads. At the same time, Sun introduced immediate availability of 7×24 year round global, enterprise-class database subscriptions and services for the entire
MySQL product line. And it made sure to tout the broad multi-platform support of MySQL – including Solaris, Linux and Windows.

This acquisition bears watching over the course of 2008 to determine its eventual impact on Sun, MySQL users, open source, and the big three DBMS vendors. So be sure to read future editions of this
column to track the impact of the Sun MySQL acquisition.


…And in Other Acquisition Related News

Of course, Oracle and Sun were not the only active acquirers this quarter. IBM agreed to buy in-memory database software provider Solid Information Technology from private owners for an undisclosed
sum. Solid’s 2007 sales were in the range of $14.4 million.

This acquisition closes a gap in IBM’s extensive and expanding database software portfolio. Heretofore, IBM did not have an in-memory database offering. Recall that Oracle acquired in-memory
database provider TimesTen back in 2005.

“IBM’s acquisition of Solid Information Technology supports the company’s growth strategy and capital allocation model, and it is expected to contribute to the achievement of the
company’s objective for earnings-per-share growth through 2010,” IBM said in a statement.

In early January Microsoft announced a $1.2 billion bid to acquire Norwegian data search company Fast Search & Transfer ASA. The deal is a significant one within the realm of enterprise search.
Microsoft’s offer was unanimously supported by Fast’s board of directors and is expected to be completed in the second quarter.

Of course, this acquisition probably has more to do with Microsoft’s ongoing competition with Google than with any database search strategy. But there are potential synergies of tying a
reliable search interface to a relational database, like SQL Server. Again, time will tell what Microsoft eventually makes of the Fast technology.


SAP and IBM Finish Some Unfinished Business

Both SAP and IBM completed acquisitions that began in 2007.

First up, in early January, SAP closed its $6.7 billion acquisition of Business Objects. The company was folded into its Business User unit, which will operate as a separate subsidiary under SAP.
The group will be led by the former CEO of Business Objects, Jonathan Schwarz. The mission of the group will be to continue Business Objects’ long-standing mission of developing business
intelligence solutions, coupled with integrating Business Objects’ software into SAP’s stack. And not letting any dust settle, SAP quickly announced nine new software packages that
combine its and Business Objects’ software.

Then in early February IBM announced the completion of its $5 billion acquisition of Cognos. Shortly thereafter, IBM unveiled its expanded Information on Demand business strategy and road map,
which included Cognos. The company announced an array of new and enhanced joint IBM-Cognos solutions, products and services from across the company that enable organizations of all sizes to gain
better insights from their data, improve decision making, and optimize business performance, including: 10 new and enhanced IBM solutions for various industries and 6 pre-integrated IBM-Cognos
product offerings that enable companies to use business intelligence to improve overall business performance.


Quarterly Revenue and Earnings Roundup

Let’s switch gears now and take a look at the earnings announcements this past quarter for the big three DBMS vendors, starting with Oracle. Second quarter earnings per share were up 40
percent to $0.31, and net income was up 38 percent to $1.6 billion, compared to the same quarter last year. Overall second quarter earnings were up 25 percent to $5.3 billion, and net income was up
35 percent to $1.3 billion.

Focusing in on the software business, revenues were up 29 percent to $4.2 billion with new software license revenues up 38 percent to $1.7 billion. Database and middleware new license revenues were
up 28 percent and applications new license revenues were up 63 percent. Services revenues were up 22 percent to $1.2 billion, compared to the same quarter last year.

So from a revenue and earnings perspective, Oracle continues to deliver impressive numbers. Moving on, let’s take a look at IBM’s fourth quarter results.

In January 2008, IBM announced fourth quarter 2007 diluted earnings of $2.80 per share from continuing operations, an increase of 24 percent, compared with diluted earnings of $2.26 per share in
the fourth quarter of 2006. The company also reported fourth quarter revenue of $28.9 billion, an increase of 10 percent.

The software business was strong with revenue of $6.3 billion, up 12% year over year, and profit up 21%. The Information Management segment of IBM’s software business, which includes DB2, was
up 11% year over year.

Also of interest from IBM, in late February IBM´s Board of Directors authorized $15 billion in additional funds for use in the company’s stock repurchase program. The company indicated that
it would spend up to $12 billion on stock repurchases in 2008. Additionally, IBM raised its guidance for the year: in January, the company said it expected 2008 full-year earnings per share of
$8.20 to $8.30. With the anticipated share repurchase activity, IBM now expects full-year 2008 earnings per share of at least $8.25, or year-to-year growth of 16 percent.

Turning our attention to the third member of the big three, Microsoft beat its earnings forecast posting a records second quarter in terms of revenue. Microsoft reported revenue of $16.37 billion,
an increase of 30 percent year over year. This handily beat expectations which were revenues of $15.95 billion. Microsoft indicated that its success in the quarter was due to strong sales of Vista
and Office 2007.

The Server and Tools division posted income of $1.17 billion in the second quarter, a 19% increase over the same quarter in 2007. SQL Server and Windows Server volume-license renewals contributed
to revenue growth ahead of the launch of 2008 versions next month. Windows Server Enterprise license revenue grew 35 percent. Consulting revenue increased 28 percent.

This quarter, we will also take a quick look at Sybase’s earnings. In late January, Sybase reported fourth-quarter revenue of $295.2 million, up 15 percent over the $256.5 million last year.
Expectations were $286.6 million. Contributing to this gain was a $27 million credit to tax expense relating to the reversal of valuation allowances on certain U.S. tax assets. Excluding this,
earnings per share was 61 cents; analysts were expecting 56 cents a share.

What does this mean? Is Sybase’s database business growing? Unlikely. The company cited its mobile middleware business which grew 22 percent, and its Sybase 365 messaging business which grew
to $38.8 million. But Sybase is high on its prospects having bought back $75.3 million of its stock during the quarter, and expecting to buy back another $50 million in the next quarter.


Mediation Ordered in Oracle’s Legal Suit Against SAP

For those of you following the legal shenanigans going on between Oracle and SAP, a judge likely put an end to your fun this quarter. But all is not lost… Let’s back up a minute for
those of you who are unfamiliar with the particulars of this lawsuit. It all started early in 2007 when Oracle sued SAP claiming that SAP stole Oracle’s trade secrets. More accurately, the
claim is that TomorrowNow, a subsidiary of SAP, had accessed Oracle’s software documentation inappropriately. If you want to read the complaint in its entirety you can find it here.

So what happened this quarter? In mid-February, a U.S. District Court judge in San Francisco ruled that the two companies should try to settle intellectual property theft and copyright infringement
charges through mediation. But Oracle is fighting this ruling, saying it will not agree to mediation and instead will file additional claims against SAP and TomorrowNow.

The judge’s order for mediation, a process known as Alternative Dispute Resolution in which the parties in a lawsuit attempt to settle a case without a trial, came after a pre-trial meeting
between the litigants. However, Oracle company spokesperson, Debra Hellinger, said in a prepared statement: “As set forth in Oracle’s current claims, it appears that SAP infringed
Oracle’s intellectual property on a daily basis over a course of many years, in ways that Oracle is only beginning to discover.”

From the perspective of an outsider who enjoys watching the spectacle, I sort of hope the fight continues. From the perspective of what actually would seem to makes sense, I think I have to side
with the judge. One has to wonder what new allegations Oracle may have against SAP; TomorrowNow was purchased in 2005, so SAP’s involvement could only conceivably stretch back that far.

So, the two companies should sit down and determine the impact of TomorrowNow’s infringements and work toward a reasonable settlement. But I think “reason” has little to
do with this and it is likely that Oracle will try to stretch this out as long as possible to instill FUD in the market for servicing Oracle applications. Obviously, Oracle wants to service its
applications – and even more obviously, Oracle does not want SAP, or its subsidiaries, servicing Oracle applications. So, in my opinion, this lawsuit tends to benefits Oracle the longer it
remains an ongoing concern.

Let’s let Oracle’s spokesperson have the last word. Hellinger stated that most cases are referred to mediation, but “no date for mediation has been set, and we are not currently
in settlement discussions.”


SQL Server 2008 Delivery Slips

Although Microsoft showed a Community Technical Preview of SQL Server 2008 in late February, it looks like the final release of their flagship DBMS will not arrive until the third quarter.
Microsoft did not provide a reason for the slippage. Among the new functionality to be delivered in SQL Server 2007 is an integrated full-text search, new data compression technology, and
enhancements to policy-based management.

There is not really much more to say here, other than this is a minor slip – from Q2 to Q3. And given that Microsoft users had to wait 5 years for the last update, an extra three months
shouldn’t have much of an effect.


Oracle Announces Data Integration Suite

 In early February, Oracle announced the availability of Oracle Data Integration Suite, which provides a comprehensive end-to-end data integration platform for connecting heterogeneous data
sources and applications. The Oracle Data Integration Suite is a component of Oracle’s Fusion Middleware.

This is an interesting announcement because the suite is built on open standards and allows users to integrate data across heterogeneous data sources and applications including DB2, MySQL,
Microsoft SQL Server, Teradata, as well as Oracle databases.

Additionally it shows how Oracle is working to utilize the disparate assets it has acquired over the years. The solution comprises pieces from Sunopsis, Hyperion, and Tangasol. It also relies on
software from Oracle partner, Trillium. With this offering Oracle can stand toe to toe with competitive offerings from IBM (Information Server) and Informatica.


New Version of PostgreSQL

In early February, the new version of the open source DBMS, PostgreSQL, was unveiled. This new release, Version 8.3, offers several performance enhancements, including an asynchronous commit option
for faster response time, synchronized scan for improving the performance of successive large queries, and Heap Only Tuples (HOT), which can significantly reduce maintenance overhead.


Summary

And so ends another edition of The Database Report. With quite a lot of activity during the first quarter, it sure promises to be an exciting year in the DBMS market. So be sure to check
in with us again next quarter to review what happens next with your favorite databases.

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Craig Mullins

Craig Mullins

Craig S. Mullins is a data management strategist and principal consultant for Mullins Consulting, Inc. He has three decades of experience in the field of database management, including working with DB2 for z/OS since Version 1. Craig is also an IBM Information Champion and is the author of two books: DB2 Developer’s Guide and Database Administration:The Complete Guide to Practices and Procedures. You can contact Craig via his website.

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