More thoughts on Sun & MySQL
First off, kudos to Sun for valuing MySQL at this price. The deal represents ~36% of Sun's Cash & Cash Equivalents (of $2.7B) on hand at the end of their last quarter (Sept. 2007). But considering how cheap debt is these days, Sun could probably fund a portion of the deal through cheap debt.
Context & Ripple Effects
Sun's purchase of MySQL lands mid-way through a deliberate identity overhaul: the company retired the SUNW ticker in favor of JAVA in August 2007 rebranding itself around software rather than hardware, and has a long open-source pedigree dating to releasing StarOffice's code, which seeded OpenOffice.org. Buying the web's dominant open-source database is the next step in that arc — Sun positioning itself as an open-source infrastructure vendor rather than a box maker.
The financial framing matters: at roughly 36% of Sun's $2.7B cash pile as of September 2007, this is a balance-sheet-heavy bet on a product whose core code is free, monetized through subscriptions and support. The analyst notes cheap debt could fund part of it, which would preserve cash but add leverage to a company still recovering from the data-center demand collapse documented back in 2005 when Sun's server business melted down.
First-order effects
- Sun commits nearly $1B — over a third of its cash reserves, or new debt — to a free-software asset whose revenue depends entirely on converting users to paid support and subscriptions.
- MySQL gains a deep-pocketed corporate parent able to fund development and enterprise sales, while commercial database incumbents Oracle, Microsoft and IBM now face a credible free alternative backed by a systems vendor.
Second-order effects
- Rivals in the open-source stack — Red Hat foremost among them — are forced to respond, since Sun can bundle MySQL with its hardware, Solaris and xVM virtualization platform (unveiled at Oracle OpenWorld in November 2007) into competing subscription packages.
- Pricing pressure spreads down the LAMP stack: if Sun subsidizes the database layer to sell systems and services, per-seat database licensing economics come under strain across the mid-market.
Third-order effects
- If the pattern holds — StarOffice becoming OpenOffice.org, now MySQL under Sun's roof — open-source infrastructure steadily consolidates inside large vendors, shifting industry value from software licenses toward hardware, services and support contracts.
- A successful debt-funded acquisition of a free-product company would normalize that financing structure for open-source M&A, encouraging other large tech firms to buy communities rather than license streams.
The trend: Large systems vendors are acquiring open-source projects outright to own the commodity software stack, monetizing it through subscriptions and hardware bundles instead of licenses.