[Info-vax] Oracle to Buy Sun

[Neil Rieck]

http://www.itbusiness.ca/it/client/en/CDN/News.asp?sub=true&id=52855

Oracle purchases Sun Microsystems for US$7.4 billion
Paying US$9.50/share for Sun, the deal moves Oracle into the hardware
arena
4/20/2009 9:37:00 AM
by Elizabeth Montalbano

Oracle (NASDAQ: ORCL) has signed a deal to purchase Sun Microsystems
(NASDAQ: JAVA) for US$7.4 billion, plunging the enterprise software
vendor into the hardware market and making Sun the latest company to
be subsumed by the Silicon Valley giant.

Oracle will pay US$9.50 per share in cash for Sun, or $US5.6 billion
net of Sun's cash and debt, according to Oracle. The move follows
Oracle's purchases of a raft of companies in the last few years,
including Siebel, PeopleSoft and BEA Systems.

The deal comes after Sun reportedly walked away from an offer from IBM
a few weeks ago. Though there were rumors Oracle might purchase Sun,
it has never before had a hardware or server OS business, a market in
which a significant amount of Sun's assets are tied, so the deal
seemed unlikely. However, Sun's Solaris long has been a successful
platform for Oracle's database business.

The two companies also have areas of common interest in their support
for Java software, one of the only areas where the companies' product
lines overlap. Sun has an open-source Java application server called
Glassfish that Oracle likely will hold onto, although the fate of
Sun's other commercial Java software, the Java Enterprise System
(JES), is unknown.

Oracle also had overlap in this area when it purchased BEA, but BEA
WebLogic had significant installed base, and Oracle kept the product
alive. Sun's installed base for JES is smaller, so Oracle may choose
not to hold onto it.

Oracle said the Sun deal should bring the company more revenue in the
first year than the company planned for its acquisitions of BEA
Systems, PeopleSoft and Siebel combined. Sun should contribute US$1.5
billion to Oracle's non-GAAP operating profit in the first year, a
number that will increase to more than $2 billion in the second year,
the company said.

For Sun, the deal will bring an end to CEO Jonathan Schwartz's efforts
to turn the struggling company around. Sun's sales have been declining
since their peak during the dot-com boom, as customers turned away
from its pricey Unix servers in favor of x86 systems. Sun's share
price has also fallen sharply.

Efforts to attract new customers with open-source software, and Sun's
belated decision to enter the x86 market, have not paid off fast
enough to give it the boost it needs.

With Sun on board, Oracle now will have to figure out how to navigate
the server OS and hardware business. In addition to supporting Solaris
for many years, Oracle also supports its software on Linux. Though
Sun's hardware does not have the reach that its former suitor IBM's
does, the deal gives Oracle a combined hardware/software business
model more akin to IBM's, with which it now competes in the database
market.

NSR