Oracle holds back Sun hardware rebates

VARs say Oracle is months late with Sun hardware rebates needed to fund their businesses.

For Sun hardware VARs, when it rains it pours.

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Not only are they on tenterhooks to hear about how (or if) Oracle Corp. will pay hardware sales rebates going into Oracle's new fiscal year, they're also still awaiting payment of those rebates from February.

This is no minor thing. The hardware rebates for this relatively small group of Sun hardware resellers probably amounts to tens of millions of dollars in aggregate. Sun Microsystems traditionally paid out rebates monthly with a 60-day lag time. That means VARs should have had the February money in-house by early May.

On Sun hardware, "you get a rebate every month, 60 days after the close of month. So in June, they'll owe us on April," said one long-time Sun hardware partner. He said this is important money to his business.

"One-third to two-thirds of your margins come from rebates because you certainly don't make it on sales anymore," he noted.

The funds are missed, he said. "My pesky employees insist on getting paid. The problem is, you can't escalate anything with Oracle. They move at their own pace," he said.

Several other Sun VARs across regions, speaking off the record, confirmed that the rebates are MIA. This is just the latest in a series of worries Sun hardware partners have faced since the change of ownership. They were already smarting from Oracle's plan to take more hardware business direct and from changes to the Sun hardware support policy.

A source at Oracle attributed the delay to paperwork issues. A spokeswoman had no comment.

Oracle plans a "virtual" Oracle Partner Network Web event on June 29. This annual kickoff is when Oracle typically lays out its channel game plan for the fiscal year starting June 1. This is the first time Sun hardware partners will be part of that mix. Oracle closed its $7.4 billion buyout of Sun in late January, following a lengthy regulatory review by the European Commission. At that time, Oracle CEO Larry Ellison said Oracle would make the Sun business profitable almost immediately.

Given last week's SEC filing by Oracle, however, that does not look likely. In the filing dated last Friday, Oracle said it would take a charge of up to $845 million to cover restructuring costs and severance related to the Sun business. Most of the cuts will come in Asia and Europe, according to Oracle.

Given that Oracle took an initial $125 million charge when it acquired Sun to cover severance costs of 3,000 employees cut, observers expect the bloodletting to be intense this time around.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com, or follow us on twitter.

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