Oracle to Buy Sun!

Posted by: Steve Hamm on April 20

In a bold move that could reshape the tech industry landscape, software giant Oracle Corp. has agreed to buy Sun Microsystems Inc. for $9.50 a share or approximately $7.4 billion. The bid is just slightly more than IBM had offered for Sun before negotiations broke off two weeks ago.
The merger would end what had begun to look like a gradual death spiral for Sun, a long-time pioneer of the tech industry that has been buffeted by the economic downturn and a shift by corporations away from its high-priced computer servers. It’s a risky move for Oracle because it doesn’t have experience in the computer hardware business.
Still, the synergies are clear. Both companies sell primarily to large corporations. Sun’s servers power datacenters in government, the telecommunications industry, and on Wall Street—managing the most demanding computing applications. Oracle’s database software is often chosen by corporations to store data for those same applications. In addition, Oracle sells off-she-shelf software packages for corporate accounting, human resources, and supply chain management. “Oracle will be the only company that can engineer an integrated systems—from applications to disk—where all the pieces fit and work together so customers do not have to do it themselves,” Oracle Chief Executive Lawrence Ellison said in a news release.
In the same news release, Sun Chairman and co-founder Scott McNeally called the merger “an industry-defining event.”
In pre-market trading, Sun shares were up $2.47, or 37 percent, to $9.16 while Oracle shares were down 76 cents, or 4 percent, to $18.30.
While Oracle had long relied on internal R&D for revenue growth, Ellison shifted in 2002 and turned the company into one of the most avaricious acquirers of other companies. Spending over $10 billion, he snapped up application software rivals including PeopleSoft and Siebel Systems, and core corporate technology providers such as BEA Systems.
In a news release issued on April 20, Oracle pointed out that when Sun’s cash assets are taken into account, the deal is valued at $5.6 billion. The company expects the Sun deal to be accretive to its earnings by at least 15 cents on a non-GAAP basis in the first full year after closing, and to contribute $1.5 billion to its non-GAAP operating profit.

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