Oracle CEO: With Sun, Co Won't Compete In High-Volume Server Market

Oracle Corp. (ORCL), with its acquisition of Sun Microsystems Inc. (JAVA) doesn't plan to compete with high-volume, low-margin server makers like Dell Inc. (DELL), Chief Executive Larry Ellison said Thursday.

Though Ellison declined to elaborate, his remarks may point to the possibility that Oracl--which is committed to maintaining Sun's high-end server business--may spin off some of its more commodity-based server making units.

Speaking on a conference call with analysts following Oracle's fiscal second-quarter results, Ellison said that Oracle wanted to focus on the "high value, high performance market."

"We think that high volume, low margin business is a good business as long as you have high volume. And that's something that Dell and Hewlett-Packard Co. (HPQ) are very good at, and we're going to avoid that business."

With its acquisition of Sun--currently awaiting clearance from European Union antitrust regulators--Oracle moves for the first time in a significant way into the hardware business. After the deal closes it will become the fourth-largest player in the $50 billion plus computer server market, as well as the world's second-biggest software maker.

Although Ellison has said repeatedly that he wants to remain in the hardware business following the closure of the Sun deal, many analysts and industry observers have expressed skepticism, speculating that Oracle's ultimate goal was to gain control of Sun's Java programming language and that Oracle would divest itself of the server-making business as soon as possible.

Ellison has previously said companies that design and build both hardware and software, such as Apple Inc. (AAPL), enjoy higher margins than those that simply build computers.

Sun's Sparc chips are favored by many of the customers who buy Oracle's databases. Ellison has said that integrating the hardware and software will allow Oracle to better serve those customers.

-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455; jessica.hodgson@dowjones.com

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