Oracle and Open Source: An Analyst Slurps from the Empyrean Spring

March 27, 2011

Analysts. One has to love them. Most ignore the injunction, “drink deep or taste not the empyrean spring.” And why not? I just read “ (CRM) And Oracle (ORCL) Benefit From Open Source and Cloud Computing Based Applications That Will Lead To Higher Software Profits In H2 2011: An Exclusive Interview With Brad Zelnick Of Macquarie Group.” That is a title that will keep the Google modified algorithm hopping. Also, the url is probably going to be dead by the time you read this article. Such is the way of the kill switch, SEO choked Internet.

The key point in this write up is the analyst’s view of Oracle. The passage I noted was this one:

One of our top picks in 2011 is Oracle Corp. (ORCL) To some extent, it’s a consensus buy-rated stock, but sometimes consensus actually gets it right. Oracle is clearly one of the greatest technology companies of all time. They are an execution machine, and they’ve got a captive installed base of customers that continue to come back year after year to purchase more and more capacity. Investors don’t necessarily give Oracle enough credit for its innovation and the amount of money invested in R&D, which in recent years has resulted in an appliance strategy that we think is game changing. Oracle has a near monopoly in certain areas of traditional database technology and even middleware. I would suggest that customers don’t want to spend a dollar more with Oracle than they have to unless there’s something truly unique and truly advantaged in terms of technology, and that’s the way we view Exadata. We believe it has a value proposition that’s compelling not just in competing with appliance-based data warehousing alternatives from the likes of Teradata (TDC) or now IBM’s (IBM) Netezza or EMC’s (EMC) Greenplum, but also for consolidating transaction-processing workloads and basically delivering superior performance at a much lower total cost. It’s so compelling that we’re hearing anecdotal evidence of customers that in the past might have come to Oracle to negotiate an enterprise deal every few years, but that are now returning to the table to take advantage of Exadata. With an average price point of about $1 million per box – if we multiply that out by what we believe the pipeline could be, we think this can be a meaningful contributor to growth for Oracle into the second half of their fiscal 2011.

On the surface, the explanation is reasonable. I like the “greatest” which adds some special zest to a former Bear, Stearns’ vineyard worker. But even more notable is “an execution machine” with “a captive base of customers.” I pretty much agree. Where this empyrean influenced thinking leads, however, is interesting. Somehow Oracle and captive does not map to Oracle and open source. My hunch is that because Oracle bought some open source goodness, that is enough for our empyrean guzzling analyst.

Oracle is a proprietary outfit. Its search is proprietary, and, in my opinion, its tie up with Amazon is proprietary. And I think anything Oracle does with open source is going to go along the “captive” and proprietary route that makes Mr. Ellison a champ among champs.

Does this matter? Not to an investment type. Does it matter to open source? Yep.

Stephen E Arnold, March 27, 2011

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