The challenge appears all the greater given that Oracle has pledged to invest heavily in all of Sun's main server families, including its Sparc- and x86-based systems, as well as the Solaris operating system, storage technologies and other products.

John Fowler, the former head of Sun's systems group and now executive vice-president of hardware engineering at Oracle, gave a candid response to reporters following an event at Oracle's headquarters last Wednesday, where Oracle laid out its Sun strategy.

'Oracle is a much more business-like, efficient company and it works much more effectively in terms of how it markets and sells products,' said John.

Oracle will make sweeping changes to Sun's supply chain, including moving the company to a build-to-order model, in which servers are shipped directly to customers from the factory.

Oracle will also cut in half the number of manufacturers Sun deals with and assemble the servers at far fewer locations.

The software company will also revamp Sun's sales efforts. It will hire 2,000 additional salespeople, have teams that specialise in tape storage and servers and reward salespeople based on the profit margins of the products they sell, rather than their gross value, said Charles Phillips, an Oracle co-president.

Like most mergers, savings will also come from combining general and administrative operations.

However, Oracle's chief executive officer Larry Ellison shot back at an analyst report that predicted Oracle will cut half of Sun's workforce to slash costs. He called it a 'highly irresponsible thing to make up'.

'We will hire 2,000 people and that will be twice as many people as we will lay off,' he added.

While Oracle plans to keep most of Sun's products alive, including its MySQL database and JavaFX development platform, it will also exit certain businesses.

Ed Screven, Oracle's chief corporate architect, said there are no plans to offer on-demand computing services like those from Amazon Web Services, meaning Sun's nascent Open Cloud initiative appears to have been cut.

John also confirmed a report that Sun had killed the development of its Rock processor, saving further money. Also, Oracle will focus its efforts primarily on the high end of the server market, which tends to yield higher profits.

Sun not setting

While Sun has reported financial losses for many of its recent quarters, it might not have been that far from profitability, said Dan Olds, principal analyst with Gabriel Consulting.

'They have lost money recently but if you go back two or three years, they actually weren't that far from being profitable,' he said.

Sun reported a net loss of US$120million (S$166.8 million) for its 2009 fiscal year, which ended Sept27, an improvement on the US$1.7 billion that it lost in 2008.

Larry said in September last year that Sun was losing 'US$100 million a month' while Oracle waited for European regulators to approve the deal. However, on Wednesday, he insisted that Sun will generate profits for Oracle almost immediately. 'It will be contributing to Oracle's profits the first month we own the company,' he added.

Charles said the delay in closing the acquisition had one advantage. 'We are not just hitting the ground running, we have been running for a while,' he said, meaning Oracle has had nine months to figure out its strategy. The company is also experienced at managing acquisitions, having bought about 60 companies in the last five years.

The deal's success will depend partly on convincing customers that Sparc and Solaris are good investments. Oracle is also betting that companies will pay a premium for integrated systems, like its recently launched Exadata Database Machine, that combine Oracle software with Sun servers and storage.

'Over the last few years, when I talked to Sun shops, they were very concerned,' John said. 'They asked when is Sparc going to fall off a cliff. Now obviously, it is not going to fall off a cliff; we are going to invest more in Sparc than Sun does.'

Reuters