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Sun Adopts Database Identity with MySQL Acquisition

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By Ken North

Sun Microsystems has been in the process of re-inventing itself in recent years, establishing an identity as a major player in grid computing and open source software. The term SunDB has sometimes appeared on presentation slides and now it carries more weight with Sun's recent step to broaden its software portfolio. With a planned acquisition of MySQL AB, Sun is strengthening its open source credentials while moving to counter the growth of the database giants IBM, Microsoft and Oracle.

In a deal Sun CEO Jonathan Schwartz described as the "most important acquisition in the company's history", Sun Microsystems is acquiring MySQL, the largest open-source database company, for $800 million in cash and $200 million in stock options. The MySQL acquisition is a dramatic shift for Sun because it has often partnered with Oracle for database technology.

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Oracle has been investing in open source software, including the BerkeleyDB and InnoDB database products. InnoDB is a storage engine that gained favor among MySQL developers needing support for online transaction processing (OLTP).

There have been more than 100 million downloads of the MySQL software. That's establishes Sun as an industry leaders in terms of seats, but not in terms of revenue.

Sun Paying a Curious Price for MySQL

Sun has established an open source identity with high-profile products such as Solaris, Star Office and Java. Like IBM and HP, Sun sees open source software as an important vehicle for stimulating the growth of hardware business such as database clusters.

Still the $1 billion price tag for MySQL is curious. About 99% of MySQL users do not pay for the database software and 1% pay for support. MySQL offers commercial licensing for MySQL and support contracts reportedly bring in about 35-40% of its revenue.

In 2001, IBM paid $1 billion to acquire the Informix database business. When Informix spun off its intelligence-solutions business unit into a separate company, the database business was generating $840 million in annual revenue. The price tag for IBM to acquire Informix was slightly more than one year's gross revenue. That deal added 120,000 new customers using commercial database software to the IBM customer list.

MySQL has experienced growth after an infusion of venture capital. MySQL reportedly has been seeing 100% growth of annual revenue in recent years, increasing from $20 million in revenues reported for 2006. So even if MySQL has been on target to have a $100 million year, it appears Sun was willing to pay 10 times MySQL's annual revenue (or more) to advance its database business.

For Sun to pay that much for MySQL, it must expect a continuing trend towards software industry consolidation. IBM and Oracle have been in acquisition mode in recent years. Oracle's most recent acquisition is BEA Systems, which is a major player in the application server and transaction processing middleware space.

Sun undoubtedly sees the acquisition as a vital strategic move to prevent IBM or Oracle from acquiring MySQL.

About the Author

Ken North is a consultant, author, conference chair for LinkedData Planet and editor of SQLSummit.com. Visit his company's web site at www.KNComputing.com.

2008, North Summit Media. All rights reserved.

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