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Sun May Help Oracle Grow in New Direction

Updated from 3:59 p.m. EDT

Despite the undoubted challenges, Oracle's (ORCL - Get Report) reported plan to keep Sun's (JAVA) hardware business could spell good news for investors.

Brimming with servers and storage, Sun seemed a strange target for the database software company when the $7.4 billion acquisition was announced last month. Software technologies such as Java, Solaris and MySQL were seen as the jewels in Sun's crown, with hardware a potential distraction from Oracle's core business. Still, there could be method in Ellison's madness.

The Oracle CEO recently told Reuters that post-acquisition, his firm has no plans to exit the hardware market.

"I thought, like a lot of people, that they would jettison the Sun hardware business," said Karl Whitelock, senior consulting analyst at tech research firm Stratecast. "But, on second thoughts, trying to figure it out makes sense."

The analyst told that Sun's different server and storage lines have pushed the firm into a range of markets. Although Sun has earned a reputation for poor execution during recent years, it has a broad footprint encompassing enterprises, service providers and high-end data centers.

With Sun, Oracle has an opportunity to exploit popular technologies, such as blade servers, in ways that it was unable to before. Furthermore, Sun plans to launch cloud storage and cloud compute services this summer that could complement Oracle's own cloud strategy.

Still, Sun's extensive software businesses were perceived as more attractive assets, providing a launch pad for Oracle's own software.

Given that more than 90% of Sun's revenue comes from hardware and related services, however, Ellison's desire to keep this part of the Sun portfolio is hardly surprising. The acquisition still sent ripples through the tech sector, though.

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