MySQL owned by Sun

This is a marvelous achievement

Sun Microsystems elbowed into the enterprise database market Wednesday with the announcement of a proposed $1 billion acquisition of MySQL, an open-source database software company. The deal, which Sun Chief Executive Jonathan Schwartz calls the "most important acquisition in the company's history," makes Sun one of the first major public companies to offer open-source software and puts the company head to head with the three big vendors in the $15 billion database market: IBM, SAP, and its former database partner, Oracle.

Compared to those three goliaths, which provide database software to 86% of the enterprise software market, according to Forrester Research, MySQL offers a simpler and cheaper solution. That makes MySQL an appealing option for small- and medium-sized businesses, says Forrester analyst Noel Yuhanna. "Unlike IBM, Oracle and SAP, MySQL has never had 50,000 features, but it does have maybe 10,000 relevant features that are relevant to enterprises," he says. "That cost savings is one of the key reasons that users have looked at open source, and fewer features means it's easier to use and manage."

MySQL's lighter-weight database system may also fit into Sun's ambitions of becoming a major player in "utility computing," a model of information technology infrastructure that pipes in software applications, processing and storage over the Internet rather than from a company's own data centers. "All other databases on the market today were designed for an offline, back-office use," says MySQL Chief Executive Marten Mickos. "Our relevance grows as enterprises shift to Web-based architecture, and that's what's happening right now."

One billion dollars, split between $800 million in cash and $200 million in stock options, may seem a hefty price tag for MySQL, which gives its software away to 99% of its customers. But the 1% of MySQL users who do pay for support include big names like Google (nasdaq: GOOG - news - people ), Yahoo! (nasdaq: YHOO - news - people ), Nokia (nyse: NOK - news - people ), and Alcatel-Lucent (nyse: ALU - news - people ). As Sun's (nasdaq: JAVA - news - people ) size lends legitimacy and the guarantee of long-term service to MySQL, the acquisition will likely convince more and larger enterprises to sign on to MySQL's cut-rate database systems, Yuhanna says.

"This makes Sun a major open-source vendor, and it will have a major pricing impact on the traditional vendors," says Donald Feinberg, an analyst with Gartner.

The purchase of MySQL, which has built one of the best brand names among privately held open source companies, is yet more evidence of how tough it is for open source companies to go to the public markets. Red Hat (nasdaq: RHT - news - people ), which has a market capitalization of about $3.7 billion, remains the primary example of a publicly traded open source company: Last year, it bought open source middleware provider, JBoss, for $350 million. Novell (nasdaq: NOVL - news - people ) snapped up SUSE Linux in 2004 for $210 million.

On Sun's part, the acquisition gives the server and software company a database offering that is capable of storing and manipulating the information used by its software tools, a role it has largely handed to Oracle. That means Sun is attempting to tap into some of the revenue that it formerly directed to Oracle, and may strain the company's relationship with its former partner.

For Oracle, the deal shouldn't come as much of a surprise. Sun first hinted at the possibility of entering the database market in 2005 when co-founder Scott McNealy cryptically showed analysts a list of database players including the words "SunDB." Since then, Sun has made minor investments in another open-source solution, PostgreSQL, hiring developers to work on that non-commercial database product and offering its own support to users.

The MySQL deal, which is slated to close in the first half of 2008, is a sign that Sun is pushing into more open-source software applications and could even enter the Linux market, the terrain of companies like Red Hat. "Sun is doing more and more with being a provider of open source in this enterprise infrastructure space," says Raven Zachary, an open-source analyst at 451 Group. "I'd start to look at them as a bigger player in software, especially open-source software, through this and other acquisitions."