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They Don't Sell The Chips Larry Wants At Fry's

Oracle CEO's Remark About Buying Chip Companies Sets Off Wild Goose Chase

Larry Ellison is one of the most misunderstood guys in Silicon Valley, and his extemporaneous pronouncements often only serve to make him more so. Sometimes his remarks are explosive and expository, like his now-famous Churchill Club cloud computing rant, and other times they are compact and cryptic, like his recent remarks about buying some chip companies. Either way, the pattern is familiar: he says something that prompts a lot of misguided chatter, and then he does something that only deepens the confusion.

After his Churchill Club diatribe, he was roundly, loudly, (and wrongly) tarred as a cloud-hating Luddite. Then, last week, when he showed off his new "cloud in a box" at OpenWorld, there was a lot of confounded mumbling damning the first as crafty equivocation or the latter as a cynical epiphany.

But, anybody who really listened to what he said and who understands what he did probably isn't so confused. At the Churchill Club, he railed against marketing hype passing for technical innovation, and at OpenWorld, he touted tangible technology that is, in his view, the real deal.

Now, with this chip thing, it's happening again. All he said was, "You're going to see us buying chip companies. Silicon is very important." But it was enough to get tongues wagging and the stock prices jumping for companies that are unlikely to be the ones he was talking about.

Chips is Chips - Not!

A lot of the chatter and (stock) speculation has focused on companies that make CPUs - AMD, ARM and Nvidia. But, to believe that Ellison would buy one of those you'd have to also believe that he's interested in putting Oracle into a business other than enterprise technology, like supplying processor chips to makers of PCs, cell phones and embedded systems. Or, you'd have to believe that the Sparc CPU wasn't a big part of why he bought Sun and that the new five-year Sparc road map is an elaborate prevarication.

To paraphrase Sigmund Freud, sometimes an enterprise technology company is just an enterprise technology company. And, in 30 years, Oracle has never tried to be anything else, so why start now? No good reason comes to mind.

Recognize that there are few Silicon Valley executives with a clearer, straighter, shorter path between thought, word and deed than Ellison. Now, think about his demonstration of the Exalogic Elastic Cloud at OpenWorld and recall what he has said this last year about vertical integration of hardware and software and about the folly of customers piecing together solutions from "best of breed" elements from different vendors. The answer to the question of which, or at least what kind of chip companies he may buy is as plain as the box on the stage.

The Exalogic Elastic Cloud comprises three main subsystems: processor, disk and interconnect, all of which, of course, incorporate an assortment of different kinds of chips. Some are standards-based commodity products with low prices and many sources, where ownership brings few rewards. Others, though, are powerful proprietary products that would bring Oracle both strong product differentiation and competitive leverage in relation to other server makers that must also use those chips.

Remember that right before his lob about buying chip companies he said, "Our focus is to build our [intellectual property] portfolio." Forget standards and after-market boards. Larry's cloud-in-a-box is a sealed cube and its hardware innards ain't nobody's business but his. So, to handicap which chip stocks should actually be moving on Ellison's latest pronouncement, look to IP-rich components surrounding the processors, disks and interconnects.

Processors

The Exalogic box he demonstrated at the show contained 30 servers, each with two six-core Xeon CPUs. Now, before you say, "See, there's where he'll put the Opterons when he buys AMD," consider instead the greater likelihood of the Xeons being replaced in the production machine with the just-announced 16-core Sparc T3, which delivers comparable performance, but runs cooler and eats less power than the x86 chip.

The interesting bit about the servers in the Elastic Cloud is that they use solid state disks (SSDs) to hold the operating system. Although SSDs are mostly made up of commodity memory chips, it takes some pretty special hardware mojo to endow them with fault tolerance and other attributes especially important in the utility (cloud) computing model.

SandForce is a four-year-old Valley start-up (sorry, traders) that just raised a $20 million D round on the strength of its patent-pending SSD controller technology. Currently SandForce packages its DuraClass controller with its own SSDs, but designed it to be easily incorporated by other SSD vendors, too.  One of DuraClass's key selling points is high and symmetrical read-write speeds, which would make it an excellent choice for OS storage in Ellison's big box.

Disks

SandForce could also play a part in Oracle's storage subsystem as a way-faster-than-disk element for storing frequently referenced data. But, we're years away from all-SSD storage in large enterprise systems and it's unclear how easily and to what advantage the SandDisk technology could be mixed with the conventional "rotating" disks that make up the bulk of the storage subsystem.

Enter Texas Memory Systems, a long-established, privately held, VC-free, engineer-run Houston-based company that is also in the SSD controller and drive business, sporting the trademark "World's Fastest Storage," claiming a number of large enterprise and government customers, and already an Oracle partner. What sets TMS apart from SandForce as a candidate for inclusion in the Oracle storage subsystem is its purchase a year ago of storage virtualization start-up Incipient, whose technology gives TMS the ability to transparently mix spinning disks with SSDs and enable easy migration from the former to the latter.

Interconnect

This is the part of the system that ties the processors to the disks and the processors to each other, and plays a big part in assuring the system's overall speed, flexibility and reliability. There's something of a battle brewing these days between two different interconnect technologies: Ethernet and InfiniBand, with many companies arrayed on either side. The Exalogic box uses InfiniBand and Ellison has made it clear he thinks it's superior to Ethernet for his purposes.

It's worth noting in passing that the increasingly popular VBlock cloud infrastructure technology being flogged by the Cisco/EMC/VMware VCE troika uses Ethernet and for that reason and others is likely to become one of Ellison's favorite piñatas in future stagecraft.

One possible acquisition candidate in the InfiniBand interconnect area is a no-brainer and thus already mentioned in a number of places. Mellanox is the leading supplier of InfiniBand chips, cards and switches, one of their guys runs the InfiniBand Trade Association, they are a long-time Sun familiar, and most companies in the InfiniBand space are in some way beholden to them. They are a public company, but not gigantic, and not diversified into other businesses that Oracle can't use.

But, Mellanox is not the only candidate in the InfiniBand interconnect area; there are others that could make good acquisition prospects, either as alternatives or in addition to Mellanox. Remember, InfiniBand is used to connect the processors to the storage and to each other. While Mellanox plays in both of those roles, there are other companies more focused on one or the other that might also fit into Oracle's plans.

QLogic makes InfiniBand products for clustering processors, but has a longer, deeper history and considerable leadership in storage-related products. In that area, besides InfiniBand, it also offers Ethernet and Fibre Channel storage connection technology. Although Oracle wants to be the only box in the data center and wants all storage to be in that box, obviously that isn't going to happen. Integrating with other storage products using all three protocols will likely be a requirement, and one that Oracle could meet with greater ease and control if it owned QLogic.

A third interconnect candidate is Voltaire, which offers InfiniBand switches and adapters with an emphasis on server clustering for high performance computing. Unlike Mellanox and QLogic, Voltaire doesn't appear to be in the chip business and their unique IP seems to be in fabric management and application acceleration software. So, depending on how literally one takes Ellison's remark about "chip" companies, Voltaire may or may not be a good possibility.

On the other hand, as of this writing, Voltaire has just become the subject of speculation as a possible acquisition by Oracle nemesis IBM as an adjunct to its purchase days ago of Voltaire partner Blade Networks. That could conceivably make Ellison more interested in buying Voltaire as a way to mess with IBM, in addition to its obvious face value.

Tell-Tales

However, one phrase that figures quite prominently in Voltaire's positioning and may make it less attractive to Oracle: "scale-out." In this context, scale-out represents the idea of building up computing capability by lashing together large numbers of small commodity boxes or blades, and it's an idea with significant proponents. Google, for instance, is essentially the biggest scaled-out system ever created.

But, Ellison is more of a "scale-up" kind of guy. Scale-up means building the biggest box you can and, if you must, then building another and hooking them together. In fact, in his Exalogic demo he suggested that two of those machines could handle all of Facebook's 500 million users.  It is a safe bet that presently Facebook is running on way more than two big machines.

So, touts take note, as you consider which companies may be on Ellison's buying radar, be skeptical about any chip and component companies flaunting "scale-out," along with "standards," "multi-vendor," "open" or anything else that doesn't make sense in the context of Ellison's vertically integrated, all-Oracle "big honkin' cloud-in-a-box." And, if a company makes most of its money selling things that don't go in a data center, forget it.

Look instead for the companies making patented proprietary chips that get soldered onto other companies' boards, and/or those making heavily engineered boards that get built into major vendors' servers. And, give extra credence to any cases where the purchase will give Oracle immediate product differentiation in terms of speed, capacity and throughput, give it technical leadership and competitive leverage, or enable it to steal a long march on IBM. If you understand Ellison, you know those are the things he cares about the most.

More Stories By Tim Negris

Tim Negris is SVP, Marketing & Sales at Yottamine Analytics, a pioneering Big Data machine learning software company. He occasionally authors software industry news analysis and insights on Ulitzer.com, is a 25-year technology industry veteran with expertise in software development, database, networking, social media, cloud computing, mobile apps, analytics, and other enabling technologies.

He is recognized for ability to rapidly translate complex technical information and concepts into compelling, actionable knowledge. He is also widely credited with coining the term and co-developing the concept of the “Thin Client” computing model while working for Larry Ellison in the early days of Oracle.

Tim has also held a variety of executive and consulting roles in a numerous start-ups, and several established companies, including Sybase, Oracle, HP, Dell, and IBM. He is a frequent contributor to a number of publications and sites, focusing on technologies and their applications, and has written a number of advanced software applications for social media, video streaming, and music education.

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