By Michael Murphy of InvestorPlace

NEW YORK (

TheStreet

) -- As

Oracle

(ORCL) - Get Report

held its annual meeting this week, CEO Larry Ellison said: "You're going to see us buying chip companies." He added that now that Oracle is in the hardware business through its acquisition of Sun Microsystems, he wants to follow the model of his friend and

Apple

(AAPL) - Get Report

CEO Steve Jobs to own more of the intellectual property in the computer chips Oracle will be using.

Wall Street immediately named

ARM Holdings

(ARMH)

,

Advanced Micro Devices

(AMD) - Get Report

,

Nvidia

(NVDA) - Get Report

and the semiconductor division of

IBM

(IBM) - Get Report

as potential acquisition targets. None of those make any sense.

I have been following Oracle since its initial public offering in March 1986. Larry Ellison has always believed in the big central server/thin client computer model, because his database software runs best on a big central server. Now that the world is going his way with cloud computing -- big central servers and data storage, with clients as small as a smartphone -- he bought Sun to be able to offer the central server hardware to Oracle's database clients. Sun has long designed its own very fast SPARC server processors, as well as offering industry-standard

Intel

(INTC) - Get Report

and AMD processors as an option. Ellison has already said he intends to invest heavily in SPARC. So you can forget an AMD acquisition; Ellison has better things to do than compete with Intel.

You also can forget an acquisition of IBM's semiconductor division. Ellison does not need to spend billions of dollars on equipment to manufacture chips when he can leverage the fabless model by using contract manufacturers like

Taiwan Semiconductor

(TSM) - Get Report

,

United Microelectronics

(UMC) - Get Report

and Chartered Semiconductor to do it for him.

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One of the key hardware products Ellison got in the Sun acquisition was Sun's thin-client SunRay products that substitute for a desktop or laptop computer. The processor in these was designed by

MIPS Technologies

(MIPS)

and is built by RMI, a company that was acquired by

NetLogic Microsystems

(NETL) - Get Report

. There are other sources for these enterprise-class processors.

In a recent issue of

New World Investor,

I said that there is a small possibility that Oracle would buy

Research In Motion

(RIMM)

because its BlackBerry is widely used in enterprises, and could be leveraged into a line of thin-client products. I suppose Oracle could buy MIPS if it wants to own the intellectual property underlying the SunRay processors. But buying ARM Holdings, which makes lower-powered processors for consumer devices like smartphones, makes no sense at all.

Finally, Nvidia makes wonderful high-end graphics processors, but a thin-client requires only a simple processor to render the data coming from the server. Sorry, Nvidia is off the list, too.

So what semiconductor companies might Oracle actually buy, other than the long shot of buying MIPS? InfiniBand is a switched fabric communications link used in high-performance computing and enterprise data centers -- the center of the cloud where Sun's servers live. It offers very high throughput with low latency, and -- very important for the cloud -- is designed to be easily scalable. Oracle/Sun use InfiniBand.

Two leading semiconductor companies with InfiniBand technology and products are

QLogic

(QLGC)

with a total market capitalization of $1.9 billion and no debt, and

Mellanox Technologies

(MLNX) - Get Report

with a total market capitalization of $670 million and $316 million in long-term debt. Either one is just an appetizer for Oracle, but each brings semiconductor intellectual property to the table that Oracle can actually use, in contrast to the names Wall Street is floating. Heck, knowing Larry, he'll probably buy them both.

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--Written by Michael Murphy.

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At the time of publication, Michael Murphy and his New World Investor subscribers did not hold or recommend any of the stocks mentioned in this article. Earlier this year they took profits in NetLogic Microsystems. Read more about Michael and his strategy at NewWorldInvestor.com

.