Oracle reveals intent to compete with IBM in the server market

Oracle, which makes money by selling software to businesses, recently acquired Sun Microsystems, which makes money through sales of software, servers and storage hardware to businesses.  Although there has been much speculation as to what Oracle, well known for its database software, would do with Sun’s open source database software known as MySQL, there has been less clarity around how Oracle would leverage Sun’s hardware business (servers and storage).

On Thursday, Oracle ran a full page ad in the Wall Street Journal spelling out the company’s intent to invest more in the recently acquired Sun server business and to compete head on with IBM.  Servers like those offered by Sun are used primarily by large and medium businesses to host software applications, manage data and run websites. Sun’s server business (Enterprise Servers) contributes 8% of the $33.34 per share Trefis price for Oracle’s stock; however there may be additional value within this division based on Oracle’s stated intentions.

Our current forecast shows Oracle losing share within the global server market due to our original belief that Oracle would not focus resources on the server business.  Server market share for Oracle (previously Sun) has been around 10% in the past and we expected this would decline to 9% over the forecast period.  Now, with Oracle stating that it will double the number of specialists selling Sun’s Solaris servers and improve hardware performance by leveraging Oracle software, the company may be positioned to gain share within the server market.

By modifying our forecast for Oracle’s Enterprise Servers Market Share, you can see how the company’s stock would be impacted if Oracle were to succeed in increasing server share at the expense of IBM.