Will OpenOffice survive the Oracle-Sun takeover?

The last week has seen a lot of speculation about the future of Sun’s open source projects now that the company has been absorbed by Oracle. Most of the fallout from Oracle’s latest acquisition falls outside my realm of expertise or even interest. Some of my university readers are certainly going to be curious (OK, some university IT folks and even the occasional K-12 shop that has invested in Sun technologies are downright nervous). However, I have to say that the only bit of Sun technology that I actually care about at this point is OpenOffice.

Sure, Solaris was becoming quite a platform for virtualization and Sun had made real strides in terms of bring cross-platform virtualized applications to the desktop. They donated time, money, and expertise to a variety of educational pursuits. We all know the open source projects they had in their stable. I just can’t get fussed about anything, though, except OpenOffice.

Mostly this is because I’m convinced that MySQL will live on; it’s simply embedded in too many places to die and has already been forked, so I’m not overly concerned. VirtualBox is great, but there are other virtualization products that will do the trick if it dies. OpenOffice has forked as well, but Go-oo.org lacks the brand recognition or credibility of OpenOffice. It is also Windows and Linux only; Macs need to rely on OpenOffice or NeoOffice, the former of which is fully cross-platform.

Why do I care about OpenOffice so much? Because it saves our schools a lot of money. More importantly, it saves our students, parents, and community members a lot of money. It means that any student with a computer can have a fully-functional, mature office productivity suite without paying hundreds of dollars or settling for the Works suite that might have come with their computers.

Can OpenOffice do a mail merge as well as Office 2007? No, not quite. Are its spreadsheet functions as easy to use? Close…very close. Aside from that, though, is there anything that most students, faculty, or staff would be looking for in an Office suite that can’t be satisfied for free with OpenOffice? The simple answer is no.

What this means is that OpenOffice must live on beyond Sun. Maybe Oracle will get behind it; I’m not so sure and I’m not alone. However, whatever rebranding of Go-oo needs to happen should happen and we should make sure that our students and schools still have access to the highest quality, free office suite available.

Author: Christopher Dawson @ http://education.zdnet.com

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Fitch Affirms Oracle's Ratings at A/F1 on Merger

Fitch Ratings has affirmed the ratings of Oracle, following the announcement that Oracle will purchase Sun Microsystems.

The ratings are affirmed as follows: --Issuer Default Rating (IDR) at 'A'; --Senior unsecured debt at 'A'; --Short-term IDR at 'F1'; --Commercial Paper (CP) at 'F1'.

The Rating Outlook is Stable.

The affirmation follows the announcement that Oracle will purchase Sun, for approximately $8.7 billion, including $1.3 billion of assumed debt ($5.6 billion net of cash and debt acquired). The Board of Directors of Sun has unanimously approved the transaction, which is anticipated to close by the summer of 2009, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.

The affirmation incorporates Fitch's expectations that Oracle will fund the acquisition with a mixture of cash, CP borrowings and long-term debt issuance, with the majority being funded with debt, given that most of the company's cash is located outside the U.S. While credit protection measures are expected to deteriorate as a result of this transaction, Fitch believes Oracle retains solid financial flexibility at its current ratings, which incorporate total leverage of approximately 1.5 times (x) given the company's current operating profile. Fitch anticipates Oracle will continue to pursue an aggressive acquisition strategy, which could temporarily drive leverage outside of expectations. However, in line with past transactions, the company is expected to refrain from meaningful share repurchases and use significant free cash flow to reduce debt incurred in the transaction.

Fitch believes that materially weaker credit metrics over an extended period from a failed integration of Sun, a more aggressive financial policy, or a significantly worse impact of the weak macroeconomic environment, could result in negative ratings actions.

Concerns for the transaction center on greater integration risk associated with Oracle's purchase of Sun due to Sun's sizable employee base (33,000 at year-end 2008) and broad and diverse product portfolio, including a significant hardware segment. Additionally, uncertainty exists regarding potential segment/product divestitures, management structure and product strategy, particularly regarding open source software (e.g. MySQL). Positively, Fitch believes that Oracle can achieve significant cost synergies, primarily general and administrative expenses. Also, Oracle should be able to able to derive incremental benefits from Sun's sizable customer base and large intellectual property portfolio (e.g. Solaris and Java software platforms).

For the latest 12 months (LTM) ended Dec. 28, 2008, Sun generated total revenue, operating EBITDA and free cash flow of $13.3 billion, $1 billion (7.7 percent margin) and $8 million, respectively. Fitch estimates server systems, storage, software, and services accounted for approximately 39 percent, 17 percent , 5 percent and 39 percent of Sun's total revenue in the LTM period, respectively.

Pro forma for the recently initiated $1 billion dividend, Fitch estimates that Oracle's free cash flow for the LTM ended Feb. 28, was $7 billion, providing the company with significant financial flexibility for this transaction. Fitch said it believes that cash restructuring payments associated with the transaction and a pressured operating environment could have a slight impact on free cash flow in subsequent years, although the cash generating capability of the underlying business is expected to remain strong.

Oracle's credit metrics are expected to deteriorate upon the transactions close as Fitch estimates leverage could increase to approximately 1.4x from 1.0x from additional debt associated with the acquisition and interest coverage declining to approximately 12x from 18x, assuming 100 percent of the transaction is debt financed.

As of Feb. 28, Oracle's cash and cash equivalents were approximately $11.3 billion, of which approximately $10.1 billion was held by foreign subsidiaries. In addition, Oracle has an undrawn $5 billion CP program backed by a $3 billion revolving credit facility expiring March 2011, and a $2 billion 364-day facility expiring March 2010 (which the company entered into upon expiration of the previous $2 billion facility in March 2009).

Total debt as of Feb. 28, was approximately $11.2 billion and consisted primarily of $1 billion of floating- rate senior notes due May 2009, $1 billion of floating-rate senior notes due May 2010, $2.25 billion of 5 percent senior notes due January 2011, $1.25 billion of 4.95 percent senior notes due April 2013, $2 billion of 5.25 percent senior notes due January 2016, $2.5 billion of 5.75 percent senior notes due April 2018, and $1.25 billion of senior notes due April 2038.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, fitchratings.com.

Comments on this story may be sent to newsdesk@closeupmedia.com

Source: www.tmcnet.com

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More thoughts on Oracle and hardware

There are two explanations making the rounds for Oracle’s unexpected entry into the hardware business. Neither on its own is wholly convincing, but each hints at what is probably really going on here.

The first is the explanation that Oracle was putting about on Monday. This holds that vertical integration of all aspects of hardware and software is the next step being demanded by the customers of enterprise technology companies, who want one throat to choke when something goes wrong.

But it hardly feels as though customer expectations have changed enough to force Oracle to buy a deeply troubled server company to take on entrenched rivals like IBM, HP and now Cisco. Not does this explanation take account of the fundamental nature of the enterprise technology industry, which relies on deep technology and business partnerships.

The other explanation is that Oracle had to move quickly to outmaneuver the slow-footed IBM, so it was willing to take on the unappealing hardware business just to get its hands on Sun’s software assets. It then follows, according to this view, that Oracle will now turn around and unload the hardware side as soon as it can, perhaps in pieces.

To judge from the people we’ve spoken to, neither of these explanations quite gets to the bottom of what is going on.

One good pragmatic reason for assuming Sun’s struggling hardware business is that, for the arch cost-cutters at Oracle, this is where many of the biggest opportunities for expense savings lie. Oracle has promised $1.5bn in operating profits from the Sun deal in the first year. Slashing hardware costs is likely to be a quick way to get there - and if the economy turns, Sun’s highly cyclical hardware arm could even provide a pleasant surprise.

One person familiar with Oracle’s thinking suggests that the company will act quickly to narrow the focus of Sun’s hardware on a smaller number of high-end system designs. And a person close to the Sun camp admits that Sun itself simply failed to act aggressively enough to cut costs - though this person adds that a big acquirer like a Oracle also has many more opportunities to save money than Sun could have done on its own, for instance by combining salesforces.

Another pragmatic reason to take on the hardware business is that it offers Oracle a strategic hedge. In a world dominated by a handful of giant systems companies, life as a pure software company could become uncomfortable: what if big partner/rivals like IBM and HP become less enthusiastic about selling and supporting Oracle’s software?

Being able to offer its own hardware gives Oracle a fall-back, according to one person close to the transaction. The very existence of an Oracle hardware division changes the equation and removes a potential weapon in the hands of its enemies.

Of course, none of this changes Oracle’s main motivation for the Sun acquisition: getting its hands on Java, Solaris and MySQL. But it does help to explain why a software company with operating profit margins of 35 per cent is willing to take on a business that recently has had trouble making any money at all.

Author: Richard Waters @ http://blogs.ft.com

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