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Defections Batter Sun Microsystems

Defections are a common occurrence during an acquisition as people get nervous about the future, even when promises are made. Despite assurances from Oracle chief Larry Ellison that his firm would retain Sun Microsystems' hardware business once the $7.4 billion merger closes, and his promise at JavaOne to fully support Java, Sun is still taking hits.

This week, Sun (NASDAQ: JAVA) lost the JRuby crew, the three developers who created a Java-based version of Ruby who joined the company just three years ago. The three developers, led by Charles Nutter, decided to move to Engine Yard, a San Francisco company that specializes in business applications built on Rails, a Ruby-based application framework.

"To be honest, we had no evidence that Oracle wouldn't support JRuby, but we also didn't have any evidence that they would. Two out of the three developers making this move have families. We want to make sure JRuby will get to the next level, and we had to make a decision," Nutter told Computerworld. He's since come down with an illness and was unavailable for an interview, but did confirm the same sentiment to

Nutter didn't bring up the acquisition in his first blog post at Engine Yard. Instead, he simply said why they chose to jump from a multi-billion dollar firm to a venture-funded start-up.

"They’ve literally written the book on how to make Rails deploy and scale easily, and if you have a tough Rails infrastructure issue, they're the company you talk to," he wrote.

Talent defections are common in acquisitions. Losing the JRuby crew isn't quite as bad as losing James Gosling, the creator of Java. He remains firmly with Sun but his departure would be devastating if it did happen. That said, Oracle (NASDAQ: ORCL) has a challenge on its hands.

"It'd be in their best interests to make offers to get people to stay on board, perhaps sweeten the deal to stay, because that's really where the value is," said Josh Farina, analyst with Technology Business Research.

"Oracle is really good at making companies run better, but ultimately it needs the talent to stay, because you still got a lot of people who love the Sun technology and it's in the line employees who make it happen."

IBM smells blood

It's not getting better on the hardware side of the business, either. In what was widely assumed to be its final quarter before the close of the acquisition, Sun's sales were down almost one-third from the previous quarter and 40 percent from the prior year.

One reason is that IBM (NYSE: IBM) is really putting a hurt on Sun right now, doing everything it can to grab customers away. Ironically, IBM says Oracle's acquisition is helping win over customers.

"The announcement of the acquisition was the domino that tipped all other dominos. People were calling us asking for help [migrating]," said Scott Handy, vice president of marketing, strategy and sales support for IBM Power Systems.

"They are all quite concerned. When Oracle bought Siebel and PeopleSoft, they increased the maintenance licenses by 25 percent per year. With BEA, licenses went up 45 percent. So they are looking at OPEX going up just to keep what they had," he said.

A Sun spokesperson told the company had no comment.

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